Question

Predetermined factory overhead rate turbo shop uses job order costing to determine the cost of performing engine repair work. estimated costs and expenses for the coming period are as follows: line item description amount engine parts $1,326,200 shop direct labor 968,000 shop and repair equipment depreciation 45,200 shop supervisor salaries 125,700 shop property taxes 22,800 shop supplies 17,500 advertising expense 26,500 administrative office salaries 114,100 administrative office depreciation expense 14,600 total costs and expenses $2,660,600 the average shop direct labor rate is $22.00 per hour. What is the predetermined factory overhead rate?

Answer 1

The predetermined factory overhead rate can be calculated by dividing the total factory overhead costs by the total shop direct labor cost. In this case, the predetermined factory overhead rate is $2.75 per dollar of shop direct labor cost.

Step-by-step explanation:

The predetermined factory overhead rate is calculated by dividing the estimated factory overhead costs by the estimated amount of the allocation base. In this case, the allocation base is the shop direct labor cost. The total shop direct labor cost is $968,000. To calculate the predetermined factory overhead rate, divide the total factory overhead costs ($2,660,600) by the total shop direct labor cost ($968,000):

Predetermined factory overhead rate = Total factory overhead costs / Total shop direct labor cost
Predetermined factory overhead rate = $2,660,600 / $968,000
Predetermined factory overhead rate = $2.75 per dollar of shop direct labor cost