Willies Engine Shop uses a job order cost system to determine

Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:

Engine Parts 875000

Shop direct labor 640000

shop & repair equip depre 45000

Shop supervisor salaries 125800

Shop property tax 22600

shop supplies 16600

ad. ex 17800

admin office salaries 75000

admin office depre ex 10000

                                  -------
                               1,827,000

The average shop direct labor rate is $16 per hour

Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.

SOLUTION PREVIEW

No. of direct labor hours = direct labor cost/direct labor rate per hour

= 640,000/16

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