Chapter 2, Problem 18P

Job-Order Costing for a Service Company
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 shopmanager’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 followingestimates:
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 availablewith respect to his job:

Compute Mr. Wilkes’ total job cost.

3. If Speedy establishes it’s selling prices using a markup percentage of 40% of its total job cost; then how much would it have charged Mr.Wilkes?