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19 August, 06:55

Wheeler's Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow: Bike parts $ 353,800 Factory machinery depreciation 59,000 Factory supervisor salaries 140,500 Factory direct labor 215,558 Factory supplies 43,900 Factory property tax 27,750 Advertising cost 26,000 Administrative salaries 52,500 Administrative-related depreciation 23,200 Total expected costs $ 942,208 Required: 1. Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $12.11 per hour. 2. Determine the amount of applied overhead if 18,900 actual hours are worked in the upcoming year.

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  1. 19 August, 10:06
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    Instructions are listed below.

    Explanation:

    Giving the following information:

    Estimated overhead costs:

    Factory machinery depreciation 59,000

    Factory supervisor salaries 140,500

    Factory supplies 43,900

    Factory property tax 27,750

    Total overhead = 271,150

    1)

    First, we need to determine the estimated direct labor hours for the period:

    Factory direct labor = 215,558

    Direct labor rate = $12.11

    Direct labor hours = 215,558 / 12.11 = 17,800 hours

    Now, we can calculate the estimated overhead rate:

    To calculate the estimated manufacturing overhead rate we need to use the following formula:

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

    Estimated manufacturing overhead rate = 271,150/17,800 = $15.23 per direct labor hour

    2) To apply overhead, we need to use the following formula:

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

    Allocated MOH = 15.23*18,900 = $287,847
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