Question

Root 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 Debra Root prepared the following budget for the year: B (Click the icon to view the prepared budget.) i (Click the icon to view additional information.) Read the requirements. Requirement 1. Compute Root Realtors' (a) hourly direct labor cost rate and (b) predetermined overhead allocation rate. Begin with (a) hourly direct labor cost rate. Direct labor cost rate per hour

Answer 1

1

a) Hourly direct labour cost rate= Estimated Direct Labour Cost/  Estimated Direct Labour Hours

= 23,00,000/20,0000

=$115/hr

b)Predetermined Overhead Allocation Rate=Estimated Total Indirect Cost/Estimated Direct Labour Cost

=(340,000+1,185,000+430,000)/2,300,000

=1,955,000/2,300,000

=.85 or 85%