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.

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