Question

In December 2016, Shire Computer’s management establishes the 2017 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur \(747,500 of overhead costs and \)575,000 of direct labor cost in year 2017. During March 2017, Shire began and completed Job 13-56.

1. What is the predetermined overhead rate for 2017?

2. Use the information on the following job cost sheet to determine the total cost of the job.

JOB COST SHEET Customer’s Name Keiser Co Job No 13-56 Job Description 5 plasma monitors—61 inch Overhead Direct Materials Direct Labor Costs Applied Date Requisition No. Amount Time-Ticket No Amount Rate Amount Mar. 8 4-129 \(5,000 T-306 \)  700 Mar. 11 4-142 7,020 T-432 1,250 Mar. 18 4-167 3,330 T-456 1,250 Totals

Short answer

The overhead rate is 130%

Step-by-step solution

Meaning of job cost sheet

A job cost sheet is a list of a job's real costs. The management team receives the report, which was put together by the accounting department, to determine whether work was properly bid.

Determining the predetermined overhead rate.

Overhead rate = Estimated overhead costs / Estimated direct labor

=$747,500 / $575,000

= 130%