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 18,000Fixed overhead cost $ 198,000Variable overhead cost per direct labor-hour $ 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: Direct materials $ 719Direct labor cost $ 177Direct labor-hours used 7 Compute Mr. Wilkes’ total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 30% of its total job cost, then how much would it have charged Mr. Wilkes?

Answer 1

Answer:

overhead rate = 11

Mr Wilkes will be charged with 1,279.2 dollars

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

we calculate the predetermined overhead rate bydistributing the expected cost ver the cost dirver. In this case, the busness uses labor hours

198,000 / 18,000 = 11

Job to Mr Wilkes

Direct Materials 719

Labor                  177

Overhead

7 hours x 11        88

Total cost          984

mark.up 30% of total cost:

selling price = cost + 30% of cost

984 + 30% = 984 x 1.3 = 1.279,2‬