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 30,000 405,000 $1.00 Variable overhead cost per direct labor-hour 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 Direct materials Direct labor cost Direct labor-hours used $619 $ 113 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 40% of its total job cost, then how much would it have charged Mr. Wilkes?

Explanation / Answer

Req 1: Pre-determined OH rate: Fixed OH rate per DLH Fixed overheads 405000 Divide: Estimated DLH 30000 Fixed OH rate per DLH 13.5 Variable OH rate per DLH 1 Pre-determined OH rate: 14.5 Req 2: Direct material 619 Direct labour 113 OH cost (4 hrs @ 14.50) 58 Total cost assigned to Wilkes 790 Req 3: Total cost assigned to Wilkes 790 Add: Markup @40% 316 Selling price charged 1106

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