Question

Leisure Heating & Cooling installs and services commercial heating and cooling systems. Leisure uses job costing to calculate the cost of its jobs. Overhead is allocated to each job based on the number of direct labor hours spent on that job. At the beginning of the current year, Leisure estimated that its overhead for the coming year would be $66,750. It also anticipated using 4,450 direct labor hours for the year. In November, Leisure started and completed the following two jobs. Job 101 Job 102 Direct materials used $ 16,000 $ 10,500 Direct labor hours used 195 72 Leisure paid a $30 per hour wage rate to the employees who worked on these two jobs.

Requirements
What is Leisure's predetermined overhead rate based on direct labor hours?
Calculate the overhead to be allocated based on direct labor hours to each of the two jobs.
What is the total cost of Job 101? What is the total cost of Job 102?

Requirement 1. Determine the formula to calculate Leisure's predetermined overhead rate based on direct labor hours, then calculate the rate. / = Predetermined overhead rate

Answer 1

Instructions are listed below

Step-by-step explanation:

Giving the following information:

Overhead is allocated to each job based on the number of direct labor hours spent on that job.

At the beginning of the current year:

The estimated overhead= $66,750.

Estimated direct labor hours= 4,450

In November, Leisure started and completed the following two jobs:

Job 101

Direct materials used= $16,000

Direct labor hours used=195

Job 102

Direct materials used= $ 10,500

Direct labor hours used= 72

Leisure paid a $30 per hour wage rate.

A) predetermined overhead rate= total estimated manufacturing overhead/ total amount of allocation base

predetermined overhead rate= 66,750/4450= $15 hour

B) Job 101:

Manufacturing overhead allocated= direct labor hours*predetermined overhead rate

Manufacturing overhead allocated= 195*15= $2925

Job 102:

Manufacturing overhead allocated= 72*15= $1080

C) Job 101:

Total cost= direct materials + direct labor + manufacturing overhead

Total cost= 16000 + 195*30 + 2925= $24,775

Job 102:

Total cost= 10500 + 72*30 + 1080= $13740