Question

Renaissance Creations restores antique stained glass windows. All jobs generate some breakage or improper cuts. This scrap can be sold to stained glass hobbyists. Renaissance Creations expects to incur approximately 90,000 direct labor hours during the year. The following estimates are made in setting the predetermined overhead rate for the year: Overhead costs other than breakage $594,400 Estimated cost of scrap $50,400 Estimated sales value of scrap (14,800) 35,600 Total estimated overhead $630,000 One job that Renaissance Creations completed during the year was a stained glass window of the Pierce family crest that took 250 hours, and direct labor is invoiced at $20 per hour. Total direct material cost for the job was $1,780. Scrap that was generated from this job was sold for $186. a. What was the predetermined overhead rate (set on the basis of direct labor hours) for the year

Answer 1

Renaissance Creations

Predetermined overhead rate is:

= $7

Step-by-step explanation:

a) Data and Calculations:

Expected direct labor hours = 90,000

Overhead costs other than breakage $594,400

Estimated cost of scrap $50,400

Estimated sales value of scrap (14,800) 35,600

Total estimated overhead $630,000

Predetermined overhead rate = $7 ($630,000/90,000)

Job done for the Pierce family:

Total direct labor hours = 250

Cost charged for direct labor = $5,000 ($20 * 250)

Cost of direct materials = 1,780

Overhead cost ($7 * 250) = 1,750

Sales value of scrap = (186)

Total costs incurred for the job $8,344