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Heating​ & cooling installs and services commercial heating and cooling systems. elklandelkland 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, elklandelkland estimated that its overhead for the coming year would be $ 61 comma 500$61,500. it also anticipated using 4 comma 1004,100 direct labor hours for the year.

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  • The predetermined overhead rate is calculated by dividing total estimated overhead costs by total estimated direct labor hours = $61,500 / 4,100 labor hours = $15 per direct labor hours
  • total overhead rate for job 102 = 72 direct labor hours x $15 per direct labor hours = $1,080
  • total overhead rate for job 101 = 155 direct labor hours x $15 per direct labor hours = $2,325.
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