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 34,000 $493,000 $ 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 $749 $ 238 6 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 60% 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 1 Required 2 Required 3 Compute the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH < Required 1 Required 2 >

Answer 1

Part 1) Calculation of Pre Determined Overhead Rate

Pre determined overhead Rate = Estimated overhead cost/ Estimated Direct Labor Hours

Pre determined overhead rate

=(493000 + 34000*1)/34000

=$15.5 DLH

Part 2) Calculation of Total Job Cost

Direct Material	749
Direct labor cost	238
Overhead applied	15.5*6=93
Total Job Cost	$1080

Part 3) Amount charged to Mr Wikes

Mark up =60% of 1080 =648

Total amount charged = Total cost + Mark up

Total amount charged =1080 +648 =$1728