Boyle's Body Shop repairs automobiles that have been involved in collisions. It's budget information follows: Since all of Boyle's technicians are paid the same rate, Boyle allocates overhead to jobs based on direct labor hours. Paul Evans brought his car to Boyle for fender repair. It took 5 hours and the new parts for the job totaled $200. How much overhead was applied to the Evans job?

Question

Boyle's Body Shop repairs automobiles that have been involved in collisions. It's budget information follows:  Since all of Boyle's technicians are paid the same rate, Boyle allocates overhead to jobs based on direct labor hours. Paul Evans brought his car to Boyle for fender repair. It took 5 hours and the new parts for the job totaled $200. How much overhead was applied to the Evans job?

Quizplus · Accepted Answer

Predetermined overhead rate = Budgeted overhead / Budgeted cost driver
Predetermined overhead rate = $500,000 / 20,000 direct labor hours* = $25 per hour.
Applied overhead = Predetermined overhead rate x actual cost driver for job
Applied overhead = $25 x 5 hours = $125.
* Budgeted direct labor cost / Budgeted labor rate = Budgeted direct labor hours
$200,000 / $10 = 20,000 hours

Boyle's Body Shop Repairs Automobiles That Have Been Involved in Collisions