E1015 Predetermined factory overhead rate Ace Engine Shop us

E10-15 Predetermined factory overhead rate Ace Engine Shop uses a job order cost system to determine the cost of performin repair work. Estimated costs and expenses for the coming period are as follows: g Engine parts Shop direct labor Shop and repair equipment depreciation Shop supervisor salaries Shop property taxes Shop supplies Advertising expense Administrative office salaries $325,000 296,000 18,000 110,000 20,500 7,500 30,000 75,000 8,000 $890,000 Administrative office depreciation expense Total costs and expenses The average shop direct labor rate is $18.50 per hour. Determine the predetermined overhead rate per direct labor hour. shop

Solution

SHOP OVERHEAD: Shop and repair equipment depreciation 18000 Shop supervisor salaries 110000 Shop property taxes 20500 Shop supplies 7500 Total shop overhead 156000 Total direct labor hours = 296000/18.50 = 16000 Predetermined overhead rate = 156000/16000 = $9.75 Per DLH