Question
ech Solutions is a consulting firm that uses job-order costing. Its direct materials consist of hardware and software it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants who work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually based on direct labor-hours. At the beginning of the year, it estimated 80,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $680,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $692,000 and its actual total direct labor was 83,000 hours.
Required:
Compute the predetermined overhead rate.
During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available for this job:
Direct materials $ 38,000
Direct labor cost $ 21,000
Direct labor-hours worked 280
Compute the total job cost for Xavier Company.
Compute the predetermined overhead rate.
Note: Round your answer to 2 decimal places.
Compute the total job cost for the Xavier Company engagement.
Direct materials
Direct labor
Overhead applied
Total manufacturing cost
Tech Solutions computes its predetermined overhead rate annually based on direct labor-hours. At the beginning of the year, it estimated 80,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $680,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $692,000 and its actual total direct labor was 83,000 hours.
Required:
Compute the predetermined overhead rate.
During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available for this job:
Direct materials $ 38,000
Direct labor cost $ 21,000
Direct labor-hours worked 280
Compute the total job cost for Xavier Company.
Compute the predetermined overhead rate.
Note: Round your answer to 2 decimal places.
Compute the total job cost for the Xavier Company engagement.
Direct materials
Direct labor
Overhead applied
Total manufacturing cost
Answers
GPT-4o mini
To compute the predetermined overhead rate (POHR) and the total job cost for Xavier Company, we can follow these steps:
### Step 1: Compute the predetermined overhead rate (POHR)
1. **Calculate Total Estimated Overhead:**
- Total Fixed Overhead = $680,000
- Variable Overhead Rate = $0.50 per direct labor-hour
- Estimated Direct Labor-Hours = 80,000
The total estimated variable overhead cost can be calculated as:
\[
\text{Total Estimated Variable Overhead} = \text{Variable Overhead Rate} \times \text{Estimated Direct Labor-Hours}
\]
\[
\text{Total Estimated Variable Overhead} = 0.50 \times 80,000 = 40,000
\]
Now, add the fixed and variable overhead to get the total estimated overhead:
\[
\text{Total Estimated Overhead} = \text{Total Fixed Overhead} + \text{Total Estimated Variable Overhead}
\]
\[
\text{Total Estimated Overhead} = 680,000 + 40,000 = 720,000
\]
2. **Calculate the Predetermined Overhead Rate (POHR):**
\[
\text{POHR} = \frac{\text{Total Estimated Overhead}}{\text{Estimated Direct Labor-Hours}}
\]
\[
\text{POHR} = \frac{720,000}{80,000} = 9.00
\]
Therefore, the predetermined overhead rate is **$9.00 per direct labor-hour**.
### Step 2: Compute the total job cost for Xavier Company
To compute the total job cost, we will sum the direct materials, direct labor cost, and the applied overhead.
1. **Given Data for Xavier Company:**
- Direct Materials = $38,000
- Direct Labor Cost = $21,000
- Direct Labor-Hours worked = 280
2. **Calculate Overhead Applied:**
Using the predetermined overhead rate calculated above:
\[
\text{Overhead Applied} = \text{POHR} \times \text{Direct Labor-Hours Worked}
\]
\[
\text{Overhead Applied} = 9.00 \times 280 = 2,520
\]
3. **Calculate Total Job Cost:**
\[
\text{Total Job Cost} = \text{Direct Materials} + \text{Direct Labor Cost} + \text{Overhead Applied}
\]
\[
\text{Total Job Cost} = 38,000 + 21,000 + 2,520 = 61,520
\]
### Summary of Results:
- **Predetermined Overhead Rate:** $9.00 per direct labor-hour
- **Total Job Cost for Xavier Company:**
- Direct Materials: $38,000
- Direct Labor: $21,000
- Overhead Applied: $2,520
- **Total Manufacturing Cost: $61,520**
### Step 1: Compute the predetermined overhead rate (POHR)
1. **Calculate Total Estimated Overhead:**
- Total Fixed Overhead = $680,000
- Variable Overhead Rate = $0.50 per direct labor-hour
- Estimated Direct Labor-Hours = 80,000
The total estimated variable overhead cost can be calculated as:
\[
\text{Total Estimated Variable Overhead} = \text{Variable Overhead Rate} \times \text{Estimated Direct Labor-Hours}
\]
\[
\text{Total Estimated Variable Overhead} = 0.50 \times 80,000 = 40,000
\]
Now, add the fixed and variable overhead to get the total estimated overhead:
\[
\text{Total Estimated Overhead} = \text{Total Fixed Overhead} + \text{Total Estimated Variable Overhead}
\]
\[
\text{Total Estimated Overhead} = 680,000 + 40,000 = 720,000
\]
2. **Calculate the Predetermined Overhead Rate (POHR):**
\[
\text{POHR} = \frac{\text{Total Estimated Overhead}}{\text{Estimated Direct Labor-Hours}}
\]
\[
\text{POHR} = \frac{720,000}{80,000} = 9.00
\]
Therefore, the predetermined overhead rate is **$9.00 per direct labor-hour**.
### Step 2: Compute the total job cost for Xavier Company
To compute the total job cost, we will sum the direct materials, direct labor cost, and the applied overhead.
1. **Given Data for Xavier Company:**
- Direct Materials = $38,000
- Direct Labor Cost = $21,000
- Direct Labor-Hours worked = 280
2. **Calculate Overhead Applied:**
Using the predetermined overhead rate calculated above:
\[
\text{Overhead Applied} = \text{POHR} \times \text{Direct Labor-Hours Worked}
\]
\[
\text{Overhead Applied} = 9.00 \times 280 = 2,520
\]
3. **Calculate Total Job Cost:**
\[
\text{Total Job Cost} = \text{Direct Materials} + \text{Direct Labor Cost} + \text{Overhead Applied}
\]
\[
\text{Total Job Cost} = 38,000 + 21,000 + 2,520 = 61,520
\]
### Summary of Results:
- **Predetermined Overhead Rate:** $9.00 per direct labor-hour
- **Total Job Cost for Xavier Company:**
- Direct Materials: $38,000
- Direct Labor: $21,000
- Overhead Applied: $2,520
- **Total Manufacturing Cost: $61,520**