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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 $754,000 of overhead costs and $580,000 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. Using the information on the following job cost sheet, determine the total cost of the job.

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Answer:

Instructions are listed below

Explanation:

Giving the following information:

The predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $754,000 of overhead costs and $580,000 of direct labor cost.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 754000/580000= $1.3 per direct labor dolar

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

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