Question

Pina Contracting Company builds additions and remodels homes. The firm's pricing policy is to estimate the direct costs of the job, allocate overhead as a percentage of the direct costs, and then add 40% to this as profit. For the next year, direct costs are estimated at $7,292,000 and overhead costs are estimated at $9,479,600. Determine the company's overhead allocation rate. (Round answer to 0 decimal places, e.g. 25%.) Overhead allocation rate LINK TO TEXT LINK TO TEXT Calculate the price that will be quoted to a customer for a remodelling job that is expected to have direct materials costs of $27,000 and direct labour costs of $14,000. Price qoute $ LINK TO TEXT LINK TO TEXT If actual direct costs next year are $6,426,000, what would be the amount of overapplied or underapplied overhead? Overhead

Answer 1

Overhead rate = Estimated overhead/estimate direct labor = 9479600/7292000 = 130% of direct cost

Price quote

Direct material	27000
Direct labor	14000
Overhead (41000*1.3)	53300
Total Job Cost	94300
Profit (94300*40%)	37720
Price quote	132020

Overhead applied = 6426000*1.3 = 8353800

Actual overhead = 9479600

Under applied overhead = 9479600-8353800 = 1125800