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    Leeds Architectural Consultants: Predetermined Overhead Rate

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    Leeds Architectural Consultants began operations on January 2. The following activity was recorded in the company's Work in Process account for the first month of operations:

    Work in Process

    Costs of subcontracted work 230,000 To completed projects 390,000
    Direct staff costs 75,000
    Studio overhead 120,000

    Leeds Architectural Consultants is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials; Direct Staff Costs is the same as Direct Labor; Studio Overhead is the same as Manufacturing Overhead; and Completed Projects is the same as Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.

    Leeds Architectural Consultants uses a job-order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (Lexington Gardens Project) had been charged with $6,500 in direct staff costs.

    Requirement 1:
    Compute the predetermined overhead rate that was in use during January. (Omit the "%" sign in your response.)

    Predetermined overhead rate %

    Requirement 2:
    Complete the following job cost sheet for the partially completed Lexington Gardens Project. (Omit the "$" sign in your response.)

    Job Cost Sheet - Lexington Gardens Project
    As of January 31
    Costs of subcontracted work ..................... $ ?
    Direct staff costs ................................... ?
    Studio overhead.................................................?

    Total cost to January 31 .................................$?.

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    Solution Preview

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    ANSWER

    Requirement 1:
    Compute the predetermined overhead rate that was in use during January. (Omit the "%" sign in your response.)

    Predetermined overhead rate %

    Requirement 2:
    Complete the ...

    Solution Summary

    The solution determines the predetermined overhead rate.

    $2.19

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