Reference no: EM132501816

Palatka Service Company has two service departments, Residential and Commercial. Overhead is applied based on direct labor cost in the Residential department and service hours in the Commercial department. Part of the 2009 budget is shown below:

2009

Budgets

                                                Residential                                Commercial

Direct labor cost                $208,000                               $2,380,500

Service hours                     480,000                                 74,200

Overhead                            $480,480                            $964,600

• Job # 6524-R7 is a Residential job that used $2,098 worth of direct supplies, incurred a direct labor cost of $7,200 and took 28 service hours to complete.

• Job # 23090-C1 is a Commercial job that used $8,750 of direct supplies, incurred a direct labor cost of $44,105 and took 78 service hours to complete.

Question a. Compute the budgeted overhead rate for each department.

Question b. What is the total overhead cost of each job?

Question c. If Job # 6524-R7 is billed at $1,000 per service hour, and Job # 23090-C1 is billed at a flat fee of $56,000, which job appears to be more profitable to Palatka Service Company? By how much?