Predetermined Factory Overhead Rate Willies Engine Shop uses a job order cost sy

Question

Predetermined Factory Overhead Rate

Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:

The average shop direct labor rate is $17 per hour.

Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.
$ per direct labor hour

Engine parts $582,300 Shop direct labor 425,000 Shop and repair equipment depreciation 23,000 Shop supervisor salaries 64,000 Shop property tax 11,600 Shop supplies 8,900 Advertising expense 11,600 Administrative office salaries 50,100 Administrative office depreciation expense 6,400 Total costs and expenses $1,182,900

Explanation / Answer

Estimated hours = Shop direct labor cost / $17

= 425,000 / $17

= 25,000 hours

Overhead:

Shop equipment depreciation = $23,000

Shop supervisor salaries = $64,000

Shop property taxes = $11,600

Shop supplies = $8,900

Total = $107,500

Overhead rate per hour = $107,500 / 25,000 hours

= $4.3

Classification:

Engine parts - Direct Materials

Shop direct labor - Direct Labor

Shop equipment depreciation - Factory Overhead

Shop supervisor salaries - Factory Overhead

Shop property taxes - Factory Overhead

Shop supplies - Factory Overhead

Advertising expense - Administrative Expense

Administrative office salaries - Administrative Expense

Administrative office depreciation exp - Administrative Expense

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