Question

Check my work 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 20,000 $ 350,000 1.00 ces 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 $ 590 $ 109 Direct labor-hours used 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? Complete the question by entering your answers in the tabs given below.

Answer 1

1.

Predetermined overhead rate = Estimated total overhead / Estimated direct labor hours

Predetermined overhead rate = $350,000+20,000 (20,000*$1) / 20,000 = $18.5 per direct labor hour

2.

Direct material	$590
Direct labor cost	109
Overhead applied (6*$18.5)	111
Total job cost	$810

3.

Total job cost	$810
Markup (810*40%)	324
Selling price	$1,134