Question

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: Bike parts $ 342,800 Factory machinery depreciation 53,500 Factory supervisor salaries 135,000 Factory direct labor 231,322 Factory supplies 42,900 Factory property tax 32,750 Advertising cost 28,000 Administrative salaries 48,000 Administrative-related depreciation 25,200 Total expected costs $ 939,472 Required: 1. Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $12.71 per hour. (Round your answer to 2 decimal places.) 2. Determine the amount of applied overhead if 18,500 actual hours are worked in the upcoming year. (Round your intermediate calculations to 2 decimals. Round your final answer to the nearest whole dollar.)

Answer 1

Answer:

predetermined overhead rate: 14.51 dollars per labor hour

applied overhead at 18,500 hours: 268,435 dollars

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

we distribute the expected overhead over the cost dirver. In this case direct labor hour:

cost driver: labor hours:

labor cost: 231,322 / 12.71 labor rate = 18,200 labor hours

expected overhead:

depreciaiton 53,500

supervisor    135,000

supplies         42,900

property tax   32,750

total overhead 264,150‬

overhead rate: 264,150 / 18,200 = 14,51373626373626 = 14.51/hr.

applied: 18,500 x 14.51 = 268.435‬