Determine predetermined overhead rate per direct labor hour


Response to the following problem:

Ace 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                                                    $325,000

Shop direct labor                                              296,000

Shop and repair equipment depreciation               18,000

Shop supervisor salaries                                     110,000

Shop property taxes                                           20,500

Shop supplies                                                     7,500

Advertising expense                                            30,000

Administrative office salaries                                  75,000

Administrative office depreciation expense              8,000

Total costs and expenses                                    $890,000

The average shop direct labor rate is $18.50 per hour. Determine the predetermined shop overhead rate per direct labor hour.

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Cost Accounting: Determine predetermined overhead rate per direct labor hour
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