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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 18,000Fixed overhead cost $ 198,000Variable 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 $ 719Direct labor cost $ 177Direct labor-hours used 7 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?
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 18,000Fixed overhead cost $ 198,000Variable 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 $ 719Direct labor cost $ 177Direct labor-hours used 7 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?
Final answer:Thepredetermined overhead rateis calculated from total overhead costs and direct labor-hours, factored into job cost along with direct materials and labor. Job cost plus a 30% markup calculates the selling price.Explanation:The predetermined overhead rate can be calculated as the total overhead cost divided by the total direct labor-hours. The total overhead cost given is the sum of the fixed overhead cost of $198,000 and the variable overhead cost, which equals thevariable overheadcost per direct labor-hour ($1) times the total direct labor-hours (18,000). Once the total overhead cost is determined, it is divided by the total direct labor-hours to get the predetermined overhead rate.Mr. Wilkes’ total job cost includes direct materials, direct labor, and overhead costs. The overhead costs are computed by multiplying the predetermined overhead rate by the direct labor-hours used for his job. Summing these three components gives Mr. Wilkes’total job cost.The selling price that Speedy would have charged Mr. Wilkes can be computed using the markup percentage on total job cost. The markup amount is obtained by finding 30% of the total job cost, and added to the total job cost to get the selling price.Learn more about Job-Order Costing here:brainly.com/question/30696157#SPJ12...