Question

Problem 2-18 Job-Order Costing for a Service Company (LO2-1, LO2-2, LO2-3) 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 6 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. Required: Required 2 Required 3 Compute Mr. Wilkes' total job cost. (Round your intermediate calculations to 2 decimal places.) ho < Prev 4 of 4 Next

Answer 1

1) $17.5 per direct labour hour

predetermined overhead rate=$350000/20000=$17.5 per direct labour hour

2) $810

total job cost=direct material cost +direct labour cost + variable overhead cost + fixed overhead cost

direct materia and labour cost are $590 and $109 respectively

variable overhead cost=variable overhead cost per direct labour hour*labour hours used

variable overhead cost=$1*6=$6

fixed overhead=predetermined overhead*labour hours used

fixed overhead=$17.5*6=$105

total job cost=$590+$109+$6+$105=$810

3) $1134

selling price at a markup of 40%

selling price=total job cost*140%

selling price=$810*140%=$1134