The Engine Shop uses a job order cost system to determine thecost of performing
ID: 2457713 • Letter: T
Question
The Engine Shop uses a job order cost system to determine thecost of performing engine repair work. Estimated costs andexpenses for the coming period are as follows:
Engineparts 650,750
Shop directlabor 520,625
Shop and repair equipmentdepreciation 12,800
Shop supervisorsalaries 93,125
Shop propertytax 22,300
Shopsupplies 12,650
Advertisingexpense 18,100
Administrative officesalaries 61,600
Administrative office depreciationexpense 8,050
Total costs andexpenses 1,400,000
The average shop direct labor rate is $17 perhour.
Determine the predetermined shop overhead rate perdirect labor hour.
Explanation / Answer
Total Direct Labourhour = $520625 / $17 = 30625 FactoryOverheads = Shop an repair equipment depreciation $12,800 Shop supervisor salaries $93,125 Shop supplies $12,650 Total factory overheads $118,575 Predetermined shop overhead rate per direct labourhour = $118575 / 30625 = $3.87 Note: shop propertytax would not included in factory overhead …..property taxget paid under expense account.
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