Tech Solutions is a consulting firm that uses job-order costing. Its direct materials consist of hardware and software it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants who work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies consumed serving clients.

Tech Solutions computes its predetermined overhead rate annually based on direct labor-hours. At the beginning of the year, it estimated 70,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $595,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $615,000 and its actual total direct labor was 77,350 hours. Compute the total job cost for the Xavier Company engagement.

To calculate the total job cost for the Xavier Company engagement, we'll need to follow these steps:

1. **Calculate the Predetermined Overhead Rate (POHR):**
   The POHR is determined at the beginning of the year based on estimated costs and labor hours.

   \[
   \text{POHR} = \frac{\text{Estimated Total Overhead Costs}}{\text{Estimated Total Direct Labor-Hours}}
   \]

   The total overhead costs include both fixed and variable components:
   - Fixed Overhead = $595,000
   - Variable Overhead = $0.50 per direct labor-hour

   Total estimated overhead:
   \[
   \text{Total Estimated Overhead} = \text{Fixed Overhead} + (\text{Variable Overhead Rate} \times \text{Estimated Direct Labor-Hours})
   \]
   \[
   \text{Total Estimated Overhead} = 595,000 + (0.50 \times 70,000) = 595,000 + 35,000 = 630,000
   \]

   Now, calculate the POHR:
   \[
   \text{POHR} = \frac{630,000}{70,000} = 9 \, \text{per direct labor-hour}
   \]

2. **Apply the Overhead to the Job:**
   The overhead applied to the Xavier Company engagement is based on the actual direct labor-hours worked for that job. However, the exact direct labor-hours for the Xavier engagement were not provided in the problem. Assuming this information is available, you would calculate the applied overhead as:

   \[
   \text{Applied Overhead} = \text{POHR} \times \text{Actual Direct Labor-Hours for the Xavier Engagement}
   \]

   Let's say the actual direct labor-hours for the Xavier Company engagement were $ X $ hours, then:

   \[
   \text{Applied Overhead} = 9 \times X
   \]

3. **Calculate the Total Job Cost:**
   The total job cost includes:
   - Direct Materials (hardware and software costs)
   - Direct Labor (consultants' salaries)
   - Applied Overhead

   \[
   \text{Total Job Cost} = \text{Direct Materials} + \text{Direct Labor} + \text{Applied Overhead}
   \]

Given the above steps, the exact total job cost cannot be determined without knowing the specific direct labor-hours and direct materials cost for the Xavier Company engagement. However, once these values are known, you can apply the formula to find the total job cost.

Would you like to provide the direct labor-hours and direct materials cost for the Xavier Company engagement, or do you have any questions about the process? 

Here are 5 relative questions that expand upon the information provided:
1. What were the actual direct labor-hours for the Xavier Company engagement?
2. How much did Tech Solutions spend on direct materials for the Xavier Company engagement?
3. How does Tech Solutions allocate overhead for engagements that span multiple years?
4. What is the difference between applied overhead and actual overhead?
5. How would an over- or under-applied overhead affect the financial statements?

**Tip:** Always double-check the estimated and actual values in job-order costing to ensure accurate calculations and adjustments at the end of the period.

Learn how to calculate the total job cost for the Xavier Company engagement using job-order costing principles. Includes detailed steps on computing the Predetermined Overhead Rate (POHR), applying overhead, and determining total job cost. Suitable for professionals and students studying managerial accounting.

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