Question

The architecture firm of Dream Design Company uses a job order cost system in pricing the home blueprints it designs for its clients. The company‘s predetermined overhead rate is 130% of direct labor cost (which, in this situation, is the amount paid to the company‘s designers). Dream Design Company estimates that it will take 32 labor hours (paying the designers $3,200) to complete the home designs for its client Joan Smitte. What is the total cost to Dream Design Company to complete this project?

Answer 1

Answer:

Total cost for Joan Smitte job 7,360

Explanation:

direct labors  3,200

overhead predeterminated rate: 130% of labor cost

This meas the firm assing overhead cost based on labor cost. Each dollar of labor cost generates 1.30 dollar of overhead.

The job for Joan Smitte labor cost is 3,200 we will multiply this by the overhead rate to get applied overhead:

3,200 x 1.3 = 4,160

The total cost would be the sum of labor cost and applied overhead:

3,200 + 4,160 = 7,360