Spring Street Engine Shop uses a job order cost system to determine the cost of

Question

Spring Street 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 $22 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 $1,205,600 Shop direct labor 880,000 Shop and repair equipment depreciation 62,500 Shop supervisor salaries 173,700 Shop property tax 31,500 Shop supplies 24,300 Advertising expense 24,100 Administrative office salaries 103,700 Administrative office depreciation expense 13,300 Total costs and expenses $2,518,700

Explanation / Answer

Calculate shop overhead rate :

so $37.44 per direct labour hour

Engine parts 1205600 Shop and repair equipment depreciation 62500 Shop supervisor salaries 173700 Shop property tax 31500 Shop supplies 24300 Total shop overhead 1497600 Direct labour hour (880000/22) 40000 Predetermined shop overhead rate 37.44

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