Problem 2-18 (Algo) 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 28,000 Fixed overhead cost $ 364,000 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 $ 777 Direct labor cost $ 215 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?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter26: Manufacturing Accounting: The Job Order Cost System

Section: Chapter Questions

Problem 10SPA: JOB ORDER COSTING WITH UNDER- AND OVERAPPLIED FACTORY OVERHEAD M. Evans Sons manufactures parts for...

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Problem 2-18 (Algo) 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	28,000
Fixed overhead cost	$ 364,000
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: