Survey of Accounting (Accounting I)
Solutions
Survey of Accounting (Accounting I)
Predetermined factory overhead rate
Novus 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 $25 per hour. Determine the predetermined shop overhead rate per direct labor hour.
Concept Introduction:
Predetermined overhead allocation:
Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads. These costs are allocated to the products using the predetermined overhead allocation rate. The formula of predetermined overhead allocation rate is as follows:
To Calculate:
The Predetermined overhead rate
The Predetermined overhead rate is calculated as follows:
| Overhead Costs: | |
| Shop and repair equipment depreciation | $ 91,000 |
| Shop supervisor's salaries | $ 250,000 |
| Shop property taxes | $ 40,000 |
| Shop Supplies | $ 15,000... |
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