Tech Solutions is a consulting firm that uses a job-order costing system its dir

Question

Tech Solutions is a consulting firm that uses a job-order costing system its direct materials d 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 well as the office supplies that are consumed serving clients computes its predetermined overhead rate annually on the basis of direct labor- hours. At the beginning of the year, it estimated that 72,500 direct labor-hours would be for the period's estimated level of client service. The company also estimated $652,500 of fised 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 $671,800 and its actual total direct labor was 77 550 required hours Required: 1. Compute the predetermined overhead rate 2. During the year, Tech Solutions started and completed the Xavier Company cngagement. The following information was available with respect to this job Direct materials Direct labor cost Direct labor hours worked $43,500 $23,400 300 Compute the predetermined overhead rate. (Round your answer to 2 decimal places) Compute the total job cost for the Xavier Company engagement (Round your intermediat calculations to 2 decimal places.) Direct materials Direct labor Overhead applied Total manufacturing cost

Explanation / Answer

1.

Predetermined overhead rate

= Predetermined fixed overhead rate + Predetermined variable overhead rate

= (Estimated fixed overhead cost/Estimated direct labor-hours) + Predetermined overhead rate

= ($652,500/72,500) + $0.50

= $9.50

2.

Total job cost for Xavier Company engagement

= Direct materials cost + Direct labor cost + Overhead applied to the job

= $43,500 + $23,400 + ($9.50 x 300)

= $69,750

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