Calculating Predetermined Overhead Rate and Applied Overhead
Spokesman Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow:
Bike parts | $347,800 |
Factory machinery depreciation | 52,500 |
Factory supervisor salaries | 134,000 |
Factory direct labor | 218,400 |
Factory supplies | 36,900 |
Factory property tax | 24,750 |
Advertising cost | 18,000 |
Administrative salaries | 46,000 |
Administrative-related depreciation | 17,700 |
Total expected costs | $896,050 |
Required:
1.Determine the predetermined overhead rate per direct labor hour if the average direct labor rate is $12 per hour.
2. Determine the amount of applied overhead if 18,500 hours are worked in the upcoming year.
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