Compute a predetermined overhead rate and calculate cost of jobs based on direct labor (as discussed)
(Learning Objectives 3 & 4) Leisure Heating & Cooling installs and services commercial heating and cooling systems. Leisure uses job costing to calculate the cost of its jobs. Overhead is allocated to each job based on the number of direct labor hours spent on that job. At the beginning of the current year, Leisure estimated that its overhead for the coming year would be $66,750. It also anticipated using 4,450 direct labor hours for the year. In November, Leisure started and completed the following two jobs:
Job 101 Job 102
Direct materials used $16,000 $10,500
Direct labor hours used 195 72
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Leisure paid a $30 per hour wage rate to the employees who worked on these two jobs.152 153 Requirements
1. What is Leisure’s predetermined overhead rate based on direct labor hours?
2. Calculate the overhead to be allocated based on direct labor hours to each of the two jobs.
3. What is the total cost of Job 101? What is the total cost of Job 102?
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