Question

# Speedy Auto Repairs uses a job-order costing system. The company’s direct materials consist of replacement parts...

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 12,000 Fixed overhead cost \$ 114,000 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 \$ 626 Direct labor cost \$ 292 Direct labor-hours used 4

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?

 1.Predetermined Overhead Rate Particulars Amount in \$ a)Direct Labour Hours 12000 Hours b)Fixed Overhead 114000 c) Variable Overhead Rate 1 d) Fixed Overhead Rate/Hr(b/a) 9.5 e) Overhead Cost/Hr(c+d) 10.5 2.Mr.Wilkes Total Job Cost Particulars Amount in \$ a)Direct Materials 626 b)Direct Labour 292 c)Over Heads(Labour Hrs * Predetermined rate) 4 Total Job Cost(a+b+c) 960 3.Selling Price Particulars Amount in \$ a)Total Job Cost 960 b)Add-Mark Up(a*40%) 384 c)Selling Price 1344

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