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 20,000 $ 350,000 $ 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: Direct materials Direct labor cost Direct labor-hours used $ 590 $ 109 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 40% of its totaljob cost, then how much would it have charged Mr. Wilkes?

Answer 1

rate positively ..

ans 1	Computation of overhead rate
	Fixed overhead rate = budgeted overhead cost/Budgeted direct labor hr
			350000/20000
			17.5	per DLH
	Variable overhead rate=	1	per DLH
	Overhead rate = 17.5+1	18.50	per DLH
ans 2
	Computation of job cost
	Direct material		590.00
	Direct labor		109.00
	overhead applied	6*18.5	111.00
	Total cost assingned to job	810.00
ans 3	Amout charged = 810*140%=	1,134.00