Exotic Engine Shop uses a job order cost system to determine the cost of performing engine...

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Exotic Engine Shop uses a job order cost system to determine the cost of performing engine...

Exotic 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:

Engine parts		$920,600
Shop direct labor		672,000
Shop and repair equipment depreciation		79,100
Shop supervisor salaries		219,900
Shop property taxes		39,900
Shop supplies		30,700
Advertising expense		18,400
Administrative office salaries		79,200
Administrative office depreciation expense		10,100
	Total costs and expenses	$2,069,900

The average shop direct labor rate is $14.00 per hour.

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

business accounting

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Answer 1

Answer #1

Firstly we have to calculate direct labour hours

= direct labour cost ÷ cost per direct labour hour

= 672000 ÷ 14

= 48000 hours

Predetermined shop overheads rate

= (depreciation +supervisor salaries +property taxes +supplies) ÷ direct labour hours

= (79100+219900+39900+30700)÷48000

= $ 7.7

Thus the correct answer is

Predetermined overheads rate

= $ 7.7 per direct labour hour

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Answer 2

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