How do you determine predetermined factory overhead rate?

Question

Estimated shop overhead:

Cost

Engine parts $650,750

Shop direct labor 520,625

Shop equipment depreciation exp 12,800

Shop supervisor salaries 93,125

Shop property taxes 22,300

Shop supplies 12,650

Adminstrative expense 18,100

Adminstrative office salaries 61,600

Adminstrative office depreciation exp 8,050

TOTAL $1,400,000

The average shop direct labor rate is $17 per hour

formulas:

labor hours = estimated total labor costs/hourly rate

predetermined shop overhead rate= estimated overhead costs/estimated hours

Answer 1

Answer:

Estimated Hours = Shop Direct Labor Cost / $17

Estimated Hours = $520625 / $ 17 = 30625 Hours

Overhead:

Shop equipment depreciation exp 12800

Shop supervisor salaries 93125

Shop property taxes 22300

Shop supplies 12650

Total $140875

Overhead Rate per Hour = $140875 / 30625 Hours = $4.60/Hour

Classification:

Engine parts - Direct Materials

Shop direct labor - Direct Labor

Shop equipment depreciation - Factory Overhead

Shop supervisor salaries - Factory Overhead

Shop property taxes - Factory Overhead

Shop supplies - Factory Overhead

Adminstrative expense - Administrative Expense

Adminstrative office salaries - Administrative Expense

Adminstrative office depreciation exp - Administrative Expense