obj EX 2-10 Predetermined factory overhead rate Spring Street Engine Shop uses a
ID: 2513733 • Letter: O
Question
obj EX 2-10 Predetermined factory overhead rate Spring Street Engine Shop uses a job order cost system to determine the cost of performi engine repair work. Estimated costs and expenses for the coming period are as follows: Engine parts Shop direct labor Shop and repair equipment depreciation Shop supervisor salaries Shop property taxes Shop supplies Advertising expense Administrative office salaries Administrative office depreciation expense $875,000 660,000 44,500 138,000 27,500 10,000 22,100 73,500 8,600 $1,859,200 Total costs and expenses The average shop direct labor rate is $30 per hour. Determine the predetermined shop overhead rate per direct labor hour.Explanation / Answer
The predetermined shop overhead rate should be computed by dividing the total shop overhead by total shop direct labor hours.
Total shop overhead = $44,500 + $138,000 + $27,500 + $10,000 = $220,000
Total shop direct labor hours = $660,000 / $30 = 22,000
Therefore,
Shop overhead rate per direct labor hour = $220,000 / 22,000 = $10
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