Exercise 2-6 Job-Order Costing for a Service Company [LO2-1, LO2-2, LO2-3]

Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firms direct labor includes salaries of consultants that work at the clients job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.

Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 92,500 direct labor-hours would be required for the periods estimated level of client service. The company also estimated $1,156,250 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firms actual overhead cost for the year was $1,177,550 and its actual total direct labor was 97,750 hours.

Required:

1. Compute the predetermined overhead rate.

2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:

Direct materials	$	39,000
Direct labor cost	$	30,600
Direct labor hours worked		370

Compute the total job cost for the Xavier Company engagement.

Required 1

Required 2

Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

Predetermined overhead rate

per DLH

Compute the total job cost for the Xavier Company engagement. (Round your intermediate calculations to 2 decimal places.)

Direct materials
Direct labor
Overhead applied
Total manufacturing cost