Wheeler’s Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow:

Question

Bike parts $350,000
Factory machinery depreciation $55,000
Factory supervisor salaries $140,000
Factory direct labor $300,000
Factory supplies $7,500
Factory property tax $37,500
Advertising cost $14,500
Administrative salaries $80,000
Administrative-related depreciation $16,000
Total expected costs $1,000,500


Required:
1. Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $15 per hour.

2. Determine the amount of applied overhead if 18,500 actual hours are worked in the upcoming year.

Answer 1

14