Question

Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that 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 that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor- hours. At the beginning of the year, it estimated that 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 firms actual overhead cost for the year was $692,000 and its actual total direct labor was 83,000 hours.Required: a. Compute the predetermined overhead rate. b. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:Direct Material $38,000Direct Labour Cost $21,000Direct Labour hours worked 280Compute the total job cost for the Xavier Company engagement.

Answer 1

Answer:

Instructions are below.

Explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (680,000/80,000) + 0.5

Predetermined manufacturing overhead rate= $9 per direct labor hour

Now, the total cost for Xavier:

Direct Material $38,000

Direct Labour Cost $21,000

Direct Labour hours worked 280

Total cost= direct material + direct labor + allocated overhead

Total cost= 38,000 + 21,000 + 280*9

Total cost= $61,520