Exercise 4-17 Manzeck Company operates a snow-removal service. The company owns

Question

Exercise 4-17 Manzeck Company operates a snow-removal service. The company owns five trucks, each of which has a snow plow in the front to plow driveways and a snowthrower in the back to clear sidewalks. Because plowing snow is very tough on trucks, the company incurs significant maintenance costs. Truck depreciation and maintenance represents a significant portion of the company's overhead. The company removes snow at residential locations, in which case the drivers spend the bulk of their time walking behind the snowthrower machine to clear sidewalks. On commercial jobs, the drivers spend most of their time plowing. Manzeck allocates overhead based on labor hours. Total estimated overhead costs for the year are $42,500. Total estimated labor hours are 1,470 hours. The average residential property requires 0.5 hours of labor, while the average commercial property requires 2.5 hours of labor. The following additional information is available Expected Use of Estimated Cost Drivers Overhead pr Activity 219,000 62,000 Activity Cost Pools Cost Drivers Plowing Square yards of surface plowed $37,000 Snowthrowing Linear feet of sidewalk cleared $5,500 Determine the predetermined overhead rate under traditional costing. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate Determine the amount of overhead allocated to the average residential job using traditional costing based on labor hours. (Round answer to 2 decimal places, e.g. 12.25.) Amount of overhead allocated s

Explanation / Answer

a) Predetermine overhead rate = 42500/1470 = 28.91 per hour

b) Amount of overhead allocated = 28.91*.50 = 14.46 per hour

c) Determine overhead rate :

Plowing = 37000/219000 = 0.17 per square yard

Snowthrowing = 5500/62000 = 0.09 per linear foot

d) AMount of overhead allocated = (20*0.17+60*.09) = $8.80

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