Question

Return Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 50,000 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $225,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm's actual overhead cost for the year was $238,100 and its actual total direct labor was 53,100 hours Required: 1. Compute the predetermined overhead rate. 2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job: Direct materials Direct labor cost Direct labor-hours worked $44,850 $28,200 200 Compute the total job cost for the Xavier Company engagement Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined overtread tate s 4.50 Der DUM

Answer 1

1.

Estimated fixed overhead cost = $225,000

Estimated direct labor hours = 50,000

Therefore,

Fixed overhead rate = $225,000/$50,000 = $4.50 per direct labor hour

And,

Variable overhead rate = $0.50 per direct labor hour

Thus,

Predetermined overhead rate = Fixed overhead rate + Variable overhead rate = $4.50 + $0.50 = $5 per direct labor hour

2.

Direct materials cost = $44,850

Direct labor cost = $28,200

Manufacturing overhead applied = Direct labor hours worked x Predetermined overhead rate = 200 x $5 = $1,000

Therefore,

Total job cost = $44,850 + $28,200 + $1,000 = $74,050