Question: Wesson Company is a consulting firm. The firm expects to have $45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is $75 per hour.
16. Calculate the predetermined overhead allocation rate for Wesson using estimated billable hours for the allocation base.
17. Wesson completed a consulting job for George Peterson and billed the customer for 15 hours. What was the total cost of the consulting job?
18. If Wesson wants to earn a profit equal to 60% of the cost of a job, how much should the company charge Mr. Peterson?
The predetermined overhead allocation rate is $7.50 per hour.
The total cost of the consulting job for 15 hours is $112.50.
The amount charged by the company from Mr. Peterson is $12 per hour.
Question: Using job order costing in a service company
Assume that Roth’s accountants are expected to work a total of 8,000 direct labor hours in 2018. Roth’s estimated total indirect costs are $96,000 and the allocation base used is direct labor hours.
2. What indirect costs will be allocated to Client 507 if Jack Smith, an accountant at Roth Accounting, works 15 hours to prepare the financial statements?
The manufacturing records for Sporty Kayaks at the end of the 2018 fiscal year show the following information about manufacturing overhead:
Overhead allocated to production
Actual manufacturing overhead cost
Predetermined overhead allocation rate
$44 per machine hours
2. Was manufacturing overhead overallocated or underallocated for the year, and by how much?
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