The Engine Shop uses a job order cost system to determine the costof performing

Question

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

Engineparts                                           $650,750
Shop directlabor                                      520,625
Shop and repair equip.depreciation             12,800
Shop supervisorsalaries                             93,125
Shop propertytax                                       22,300
Shopsupplies                                             12,650
Advertisingexpense                                    18,100
Advertising officesalaries                           61,600
Administrative office depreciationexp.          8,050
     Total costs andexpenses                 $1,400,000

The average shop direct labor rate is $17 per hour.
Determine the predetermined shop overhead rate per direct laborhour.

Explanation / Answer

Shop overheads Shop & Repair equipmentdepreciation               $12,800 Shop SupervisorsSalary                                    $93,125 Shop Propertytax                                               $22,300 ShopSupplies                                                     $12,650 Advertising officeSalaries                                    $61,600 Administrative officedepreciationexpenses           $ 8,050   Missing Item Or mistake in otherfigures              $ 19,475             ***See note below                                                                   ______________       Total Shopoverheads                                   $230,000                                                                   ============= ***Note:    1,400,000    -    (650,000+ 520,000 + 12,800 + 93,125 + 22,300 + 12,650 + 61,600 +8,050 )                     1,400,000   -   1,380,525      =   $19,475   Predetermined Shop OverheadRate   =   Total ShopOverhead   /   Direct Laborhours                                                          =   $230,000 / 30,588   ****Seecalculation below                                                          =   $7.519 per DLH                          ****Direct laborhours   =   Direct Labor Cost /Direct labor cost per hour                                           =   $520,000   /   $17                                        =   30,5888DLH

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