The Coastal Landscaping and Snow Removal company uses normal costing to assign overhead costs to the firm's various jobs. Labor is charged to jobs at $25 per hour and for the upcoming winter session, overhead is estimated at $200,000 for $10,000 hours of activity.
A. Using normal costing, what would be the total charge for removing snow from a mall parking lot that took four hours to clear?
B. If actual overhead costs are $215,000 and actual hours worked are 11,000, is overhead overapplied or underapplied?
** Please see the attached Excel file for the complete solution **
1 Calculation of overhead Aplication Rates
Cost Driver Predetermined Overhead Rate
Formula for overhead Rate Budgeted Overhead rate
Direct labor hours Budgeted overheads $200,000
Budgeted Direct labor hours 10000
Overhead application rate per hour $20
A Statement showing the total charge for removing snow from a mall parking lot.
Direct labor @ $25 per hour for 4 hours. $100
Overhead @$20 per hour for 4 hours $80
Total charge for removal of snow using normal costing. $180
This solution explains how to cost a product, given various factors, in Excel.