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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-ordercosting system. Its direct materials consist of hardware andsoftware that it purchases and installs on behalf of its clients.The firm’s direct labor includes salaries of consultants that workat the client’s job site, and its overhead consists of costs suchas depreciation, utilities, and insurance related to the officeheadquarters as well as the office supplies that are consumedserving clients.

Tech Solutions computes its predetermined overhead rate annuallyon the basis of direct labor-hours. At the beginning of the year,it estimated that 92,500 direct labor-hours would be required forthe period’s estimated level of client service. The company alsoestimated $1,156,250 of fixed overhead cost for the coming periodand variable overhead of $0.50 per direct labor-hour. The firm’sactual overhead cost for the year was $1,177,550 and its actualtotal direct labor was 97,750 hours.

Required:

1. Compute the predetermined overhead rate.

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

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

Compute the total job cost for the Xavier Companyengagement.

Required 1

Required 2

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

	Predetermined overhead rate per DLH

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

	Directmaterials Directlabor Overheadapplied Total manufacturing cost