PROBLEM 2–18 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:

20,000

. . . . . . . . . . . . . $350,000

$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 Direct labor cost Direct labor-hours used Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Direct labor-hours . . . . . . . . . . . . . . . $590 . . . . . . . . . . . . . . . $109 . . . . . . . . . 6 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?