Smith & Sons is a firm that makes custom built bookcases for customers. At the beginning of the year it estimates its overhead costs will be $7000 each month and that it will use a total of 3400 direct labour hours on all its jobs over the year. Overheads are to be charged to jobs on the basis of number of direct labour hours used.
The information below is available for job No. 181 that the firm has just completed:
Direct materials .......................$275
Direct labour .......................... 28 hours
Wage rate .............................. $15 per hour
Required:
A. Calculate the overhead recovery rate for Smith and Sons.
B. Calculate the full cost of job No 181.