Week $10$: Job Costing I for Craig's Design and Landscaping $($Part $1)$

Craig's has asked you to do some job costing for the company. He wants to assure he is charging his customers the right prices and making a profit.

You suggest to him that each client $($customer$)$ is a different "job". You will trace direct labor, materials, and travel costs directly to each job $($client$).$

You suggest that he allocates overhead to each job based on the number of direct labor hours spent on that job.

At the beginning of the year, you estimate its overhead for the coming year would be $$42,500.$ After talking with Craig, it is also anticipated that the company will be using $2,125$ direct labor hours for the year. In October, Craig started and completed the following two jobs:

Job $101$

Job $102$

Direct Materials Used

$$6,050$

$$1,500$

Direct Labor Hours Used

$185$

$75$

Craig paid an average of $$24\mathrm{.}50$ per hour wage rate to the employees who worked on these two jobs. Craig billed the customer for Job $101$ $$18,750$ and $$7,000$ for Job $102.$

Click here for more information about manufacturing overhead.

Requirements:

What is Craig$$s predetermined overhead rate based on direct labor hours?

Calculate the overhead to be allocated to each of the two jobs based on direct labor hours.

What is the total cost of Job $1?$ What is the total cost of Job $2?$

Which job earned a higher gross profit in dollars and gross profit percentage? Which option would be more preferable for Craig$$s Landscaping and why?