Speedy Auto Repairs uses a job-order costing system. The company\'s direct mater

Question

Speedy Auto Repairs uses a job-order costing system. The company's direct materials consist of replacement parts installed in customer vehicles, and its direct labor consists of the mechanics' hourly wages. Speedy's overhead costs include various items, such as the shop manager's salary, depreciation of equipment, utilities, insurance, and magazine subscriptions and refreshments for the waiting room. The company applies all of its overhead costs to jobs based on direct labor-hours. At the beginning of the year, it made the following estimates: Direct labor-hours required to support estimated output Fixed overhead cost Variable overhead cost per direct labor-hour 40,000 640,000 $1.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, and tires. The following information was available with respect to his job:

Explanation / Answer

Required 1

Predetermined overhead rate = total overhead cost / estimated direct labor hours

Total overhead cost = fixed overhead cost + Variable overhead cost = 640000+(1*40000) = 680000

Predetermined overhead rate = 680000/40000 = $17.00 per DLH

Required 2

Required 3

1090*1.50 = 1635

Direct materials 707 Direct labor 230 Overhead applied 153 (17*9) Total cost assigned to wilkes 1090

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