Chapter 19, Problem E19.27E

To determine

Direct Labor Cost: Direct Labor Cost is a direct manufacturing cost that is incurred in the production of goods or provision of services.

Manufacturing Overhead: Manufacturing overhead refers to indirect costs that are incurred in the factory, other than direct materials costs and direct labor costs. Some of the examples of manufacturing overhead are depreciation on manufacturing plant and equipment, property taxes on plant, plant janitor’s wages etc.

Predetermined Overhead Allocation Rate: A predetermined overhead allocation rate is used to assign the indirect manufacturing overhead costs to the units of production. It is computed by dividing the estimated overhead cost by an estimated quantity of allocation base.

Allocation Base: An allocation base is used to allocate the indirect overhead costs. For example: Direct labor hours, machine hours, direct labor cost etc.

1.

(a.):

To Compute: Chance Realtor’s hourly direct labor cost rate.

To determine

(b.)

To Compute: Chance Realtor’s predetermined overhead allocation rate.

To determine

2.

To Compute: The predicted cost of the Maynard Manufacturing job.

To determine

3.

To find out: How much Chance should bid for the Maynard Manufacturing job, if he wants to earn a profit that equals 25% of the job’s cost.