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- anonymous

Labor time = 8 hours
Overhead rate = 65%
Retail price of parts = $98.70
Total cost of job = $242.58
What is hourly rate for labor? $ _________

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- anonymous

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- anonymous

@JamesWolf can you help me with this problem

- anonymous

Do you know if "overhead rate" applies only to labor?

- anonymous

65%

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- anonymous

I think you set this up like this:
Total cost of job = (retail price of parts) + Labor cost + overhead amount
We know the cost of the job and the retail price, but we need to solve for the labor rate per hour and we don't have the overhead amount, just the overhead percentage.
So, first, let's use the costs we know:
242.58 = 98.70 + Labor Cost + Overhead Cost
144.08 = Labor Cost + Overhead Cost

- anonymous

Now, we need to use the info about overhead... overhead cost is 65% of the cost of labor.
So we can say: Overhead Cost = 0.65(Labor Cost)
Now rewrite the previous equation and substitute:
144.08 = Labor Cost + Overhead Cost
144.08 = Labor Cost + (0.65)(Labor Cost)
Then simplify by adding the two labor cost terms:
144.08 = (1.65)Labor Cost
Now you can solve for TOTAL labor cost.
But you still need to divide by the 8 hour labor time to get the hourly rate.

- anonymous

I have to sign off for a bit... hope this helps.
P.S. there is a small chance that the overhead rate of 65% applies to both labor cost and to the retail price of parts. I'm sure your class is math and not business accounting, so I don't really know how to know for sure what they wanted you to do, but I think overhead here just applies to labor, not to retail price of parts... that's the way I set it up above.
Good luck...

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