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 90,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $1,080,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $1,098,900 and its actual total direct labor was 93,350 hours.


Required:

Answer 1

1. Predetermined overhead rate = $12.50

2. Job Cost = $62,500

Step-by-step explanation:

Note: The Requirement is attached as picture below

1. Predetermined fixed overhead rate = Estimated fixed manufacturing overhead / Estimated total amount of the allocation base

Predetermined fixed overhead rate = $1,080,000 / 90,000

Predetermined fixed overhead rate = $12 per Direct labor hour

The Predetermined variable overhead rate per Direct labor hour is $0.50

Predetermined overhead rate = Fixed overhead rate + Variable overhead rate

Predetermined overhead rate = $12 + $0.50

Predetermined overhead rate = $12.50

2. The total job cost is given below:

Job Cost = Direct material + Direct labor + Overheads

Job Cost = $38,000 + $21,000 + (280*$12.50)

Job Cost = $38,000 + $21,000 + $3,500

Job Cost = $62,500