Peterson Heating & Cooling installs and services commercial heating and cooling systems. Peterson uses job costing to calculate the cost of its jobs. Overhead is allocated to each job based on the number of direct labor hours spent on that job. At the beginning of the current year, Peterson estimated that its overhead for the coming year would be $63,750. It also anticipated using 4,250 direct labor hours for the year. In October, Peterson started and completed the following two jobs:
______________________________________________Job 101_______Job 102
Direct materials used .......................................................... $17,500................$13,000
Direct labor hours used .............................................................. 195.........................76
Peterson paid a $24-per-hour wage rate to the employees who worked on these two jobs.
Requirements
1. What is Peterson's predetermined overhead rate based on direct labor hours?
2. Calculate the overhead to be allocated to each of the two jobs based on direct labor hours.
3. What is the total cost of Job 101? What is the total cost of Job 102?