Reboot Inc. provides computer repair services for the community. Ashley DaCostas computer was not working, and she

Reboot Inc. provides computer repair services for the community. Ashley DaCosta’s computer was not working, and she called Reboot for a home repair visit.

The Reboot Inc. technician arrived at 2:00 p. m. to begin work. By 4:00 p. m., the problem was diagnosed as a failed circuit board. Unfortunately, the technician did not have a new circuit board in the truck, since the technician’s previous customer had the same problem, and a board was used on that visit. Replacement boards were available back at Reboot’s shop. Therefore, the technician drove back to the shop to retrieve a replacement board. From 4:00 to 5:00 p. m., Reboot’s technician drove the round trip to retrieve the replacement board from the shop.

At 5:00 p. m., the technician was back on the job at Ashley’s home. The replacement procedure is somewhat complex, since a variety of tests must be performed once the board is installed. The job was completed at 6:00 p. m.

Ashley’s repair bill showed the following:

Circuit board .... $ 80

Labor charges ... 260

Total ...... $ 340

Ashley was surprised at the size of the bill and asked for some greater detail supporting the calculations. Reboot responded with the following explanations:

Cost of materials:

Purchase price of circuit board ............ $ 65

Markup on purchase price to cover storage and handling . 15

Total materials charge ............... $80

The labor charge per hour is detailed as follows:

2:00–3:00 p. m. ... $ 65

3:00–4:00 p. m. ..... 40

4:00–5:00 p. m. ..... 95

5:00–6:00 p. m. .... 60

Total labor charge . $ 260

Further explanations in the differences in the hourly rates are as follows:

1. If you were in Ashley’s position, how would you respond to the bill? Are there parts of the bill that appear incorrect to you? If so, what argument would you employ to convince Reboot that the bill is too high?
2. Use the headings below to construct a table. Fill in the table by first listing the costs identified in the activity in the left-hand column. For each cost, place a check mark in the appropriate column identifying the correct cost classification. Assume that each service call is ajob.

Transcribed Image Text:

First hour: Base labor rate Fringe benefits Overhead (other than storage and handling) $22 10 Total base labor rate $40 Additional charge for first hour of any job to cover the cost of vehicle depreciation, fuel, and employee time in transit. A 30-minute transit time is assumed. 25 $65 Third hour: Base labor rate 40 The trip back to the shop includes vehicle depreciation and fuel; therefore, a charge was added to the hourly rate to cover these costs. The round trip took an hour $95 $40 eight-hour day (starting at 5:00 PM.) is equal to the base rate. 20 Fourth hour: Base labor rate Overtime premium for time worked in excess of an $60