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 1 Required 2 Required 3 Compute the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined Overhead Rate per DLH Drnir BE

Answer 1

1) Pre-determined Overhead Rate = Esti. Fixed overhead cost/Estimated DLHs

Pre-determined Overhead Rate = 350000 / 20000 = $17.50 per DLH

2) Mr. Wilkes total job cost =
		Amount $
DM		590
DL		109
Overhead:
variable	6 * 1	6
Fixed	6*17.5	105
Total Job cost		810
3) Amount charged to Mr. Wilkes =
total Job cost		810
Add: Mark-up (40%)	810*0.4	324
Amount charged to Mr. Wilkes		1134