Shauntay James has just started a new business -building and installing custom g

Question

Shauntay James has just started a new business -building and installing custom garage organization systems. Shauntay builds teh cabinets and work benches in his workshop, then installs them in client's garages. Shauntay figures his overhead for the comming year will be $9,000. SInce his business is labor intensive, he plans to use direct labor hours as his overhead driver. For the coming year, he expects to complete 75 jobs, averaging 20 direct labors each. However, he has the capacity to complete 125 jobs averaging 20 direct labor hours each.

required:

1. four measures of activity level were mentioned in the text. Which two measures is Shauntay considering in computing a preetermined overhead rate?

2. compute the predetermined overhead rates using each of the measures in your answer to requirement 1

3. which one would you recomended that Shauntay use? why?

Explanation / Answer

The explanation of the the steps for figure 1 is not correct. it should be 9,000/75/20=$6.00 Direct labor hour (Expected actual activity)

#2 does not have the correct answer.

2. is 9,000/125/20= $3.60 direct labor hour (Theoretical activity)

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