Road Runner 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 $810,000 Shop direct labor 770,000 Shop and repair equipment depreciation 64,000 Shop supervisor salaries 212,000 Shop property taxes 35,000 Shop supplies 18,000 Advertising expense 44,000 Administrative office salaries 73,400 Administrative office depreciation expense 12,000 Total costs and expenses $2,038,000 The average shop direct labor rate is $22 per hour. Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Road Runner Engine Shop uses a
| Engine parts | $810,000 | |
| Shop direct labor | 770,000 | |
| Shop and repair equipment |
64,000 | |
| Shop supervisor salaries | 212,000 | |
| Shop property taxes | 35,000 | |
| Shop supplies | 18,000 | |
| Advertising expense | 44,000 | |
| Administrative office salaries | 73,400 | |
| Administrative office depreciation expense | 12,000 | |
| Total costs and expenses | $2,038,000 |
The average shop direct labor rate is $22 per hour.
Determine the predetermined shop
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