Predetermined Factory Overhead Rate Willies Engine Shop uses a job order cost sy

Question

Predetermined Factory Overhead Rate

Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:

The average shop direct labor rate is $17 per hour.

Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.
$ per direct labor hour

Engine parts $582,300 Shop direct labor 425,000 Shop and repair equipment depreciation 23,000 Shop supervisor salaries 64,000 Shop property tax 11,600 Shop supplies 8,900 Advertising expense 11,600 Administrative office salaries 50,100 Administrative office depreciation expense 6,400 Total costs and expenses $1,182,900

Explanation / Answer

Shop Overhead costs:

Shop supplies

Total cost of Factory/Shop Overhead=

8,900

$107500

Direct labor hours = $425000 / 17 = 25000 hours

Predetermined shop overhead rate per direct labor hour = 107500 / 25000 = $4.30 per DLH

Shop and repair equipment depreciation 23,000 Shop supervisor salaries 64,000 Shop property tax 11,600

Shop supplies

Total cost of Factory/Shop Overhead=

8,900

$107500

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