Question

Norton Associates is an advertising agency in Austin, Texas. The company's controller estimated that it would incur $264,000 in overhead costs for the current year. Because the overhead costs of each project change in direct proportion to the amount of direct professional hours incurred, the controller decided that overhead should be applied on the basis of professional hours. The controller estimated 22,000 professional hours for the year. During October, Norton incurred the following costs to make a 20-second TV commercial for Central Texas Bank:Direct materials $ 32,000Direct professional hours ($65/hour) 1,200The industry customarily bills customers at 150% of total cost.1. Compute the predetermined overhead rate.2. What is the total amount of the bill that Norton will send Central Texas Bank?

Answer 1

$186,600

Step-by-step explanation:

The computation of the predetermined overhead rate is shown below:

= Estimated manufacturing overhead / expected tptal labor hours

= $264,000 / 22,000 hours

= $12

Now for determining the total amount of bill first determine the total cost which is shown below:

Total cost is

= Direct material + direct cost + overhead cost

= $32,000 + 1,200 * $65 + 1,200 * $12

= $32,000 + $78,000 + $14,400

= $124,400

Now the total amount of the bill is

= 150% of $124,400

= $186,600