Question

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 77,500 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $775,000 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 $789,800 and its actual total direct labor was 83,350 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 $ 52,950 $ 30,500 Compute the total job cost for the Xavier Company engagement 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 overhead rate per DLH

Answer 1

Required 1 :
Compute the predetermined overhead rate :
Predetermined overhead rate = Total estimated overhead cost / Total estimated direct labor hours
Predetermined overhead rate = $ 813,750 / 77,500
Predetermined overhead rate = $ 10.50 per Direct labor hour
EXPLANATION :
To calculate the Total Estimated overhead cost :	Amount($)
Particulars	$ 38,750
Variable overhead cost
(77,500 Direct labor hours *$ 0.50 )	$ 775,000
Fixed overhead cost (Given )	$ 813,750
Total Estimated overhead cost
Total estimated direct labor hours = 77,500 Direct labor cost

Required 2 :

Compute the total job cost for the Xavier company Engagement :

Direct Materials	$ 52,950
Direct Labor	$ 30,500
Overhead applied (320 Direct labor * $ 10.50 )	$ 3,360
Total Manufacturing cost	$ 86,810