Exercise 1717 Part Level Submission Manzeck Company operates

Exercise 17-17 (Part Level Submission)

Manzeck Company operates a snow-removal service. The company owns five trucks, each of which has a snow plow in the front to plow driveways and a snowthrower in the back to clear sidewalks. Because plowing snow is very tough on trucks, the company incurs significant maintenance costs. Truck depreciation and maintenance represents a significant portion of the company’s overhead. The company removes snow at residential locations, in which case the drivers spend the bulk of their time walking behind the snowthrower machine to clear sidewalks. On commercial jobs, the drivers spend most of their time plowing. Manzeck allocates overhead based on labor hours. Total overhead costs for the year are $41,000. Total labor hours are 1,330 hours. The average residential property requires 0.5 hours of labor, while the average commercial property requires 2.5 hours of labor. The following additional information is available.

Activity
Cost Pools

Cost Drivers

Estimated
Overhead

Expected Use of
Cost Drivers
per Activity

Determine the predetermined overhead rate under traditional costing. (Round answer to 2 decimal places, e.g. 12.52.)

Solution

Predetermined overhead rate = Estimated overhead/Estimated hours

= ($40,200+$5,200)/205,000

= $45,400/205,000

= $0.22