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 44,000 Fixed overhead cost $ 748,000 Variable overhead cost per direct labor-hour $ 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 $ 633 Direct labor cost $ 231 Direct labor-hours used 2 Compute Mr. Wilkes’ total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 30% of its total job cost, then how much would it have charged Mr. Wilkes?

Answer 1

Instructions are listed below

Step-by-step explanation:

Giving the following information:

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 44,000

Fixed overhead cost $ 748,000

Variable overhead cost per direct labor-hour $ 1.00

1) Predetermined overhead rate= total estimated manufacturing overhead/ total amount of allocation base

Predetermined overhead rate= (748,000/44000)+1= $18

2) Direct materials $ 633

Direct labor cost $ 231

Direct labor-hours used 2

Total job cost= direct materials + direct labor + manufacturing overhead= 633 + 231 + (2*18)= $900

3) Selling prices= markup percentage of 30% of its total job cost.

Price= 900*1.30= $1,170