Question

Chance Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined overhead allocation rate, computed as a percentage of direct labor costs. At the beginning of 2018, managing partner Andrew Chance prepared the following budget for the year BE: (Click the icon to view the prepared budget.) i (Click the icon to view additional Information.) 0 Data Table Read the requirements. Requirement 1. Compute Chance Realtors' (a) hourly direct labor cost rate and (b) predetermined overhead allocation rate. Begin with (a) hourly direct labor cost rate. $ Direct labor hours (professionals) Direct labor costs (professionals) Office rent Support staff salaries Direct labor cost rate per hour 13,750 hours 2,200,000 330,000 1,200,000 450,000 Ulities i Dane Print Requirements i More Info 1. Compute Chance Realtors" (a) hourly direct labor cost rate and (b) predetermined overhead allocation rate. 2. Compute the predicted cost of the Maynard Manufacturing job. 3. If Chance wants to earn a profit that equals 25% of the job's cost, how much should he bid for the Maynard Manufacturing job? Maynard Manufacturing, Inc. is inviting several consultants to bid for work. Andrew Chance wants to submit a bid. He estimates that this job will require about 180 direct labor hours. Print Done Print Done

Answer 1

1. hourly direct labor cost rate

          = Estimated Direct Labor Cost / Estimated Direct Labor Hours

= 2,200,000 / 13,750

= 160 per Hour

2. Predetermined overhead allocation rate.

   = Estimated total indirect costs / Estimated direct labor costs

     = (330,000+1,200,000+450,000) / 2,200,000

     = 1,980,000 / 2,200,000

     = 0.90 or 90%

3. Computation of the predicted cost of the Chance Realtor’s consulting Firm

Direct labor (180 hrs x 160)                        = 28,800

Add: Indirect Cost (90 % of 28,800)            = 25,920

Total Predicted Cost                                    54,720

Add: Desired Profit (54,720 x 25%)                13,680

Required service Revenue                              68,400