All Tech Automotive uses a job order costing system to determine the cost of work completed for its customers. All Tech employs a single plant-wide overhead rate based on direct labor hours to apply overhead to individual repair jobs. For the current year, overhead is estimated to be $200,000 and direct labor hours are estimated to total 8,000. Tim Johnson's brake repair job required two direct labor hours to complete. All Tech will apply $50 of overhead to the Johnson repair job.

Question

Quizplus · Accepted Answer

The plant-wide overhead rate is calculated as $200,000 estimated overhead / 8,000 estimated direct labor hours = $25 per direct labor hour. For Tim Johnson's brake repair job, which required two direct labor hours, the applied overhead would be 2 hours * $25/hour = $50.

All Tech Automotive Uses a Job Order Costing System to Determine