Geek Chic Company provides computer repair services for the community. Obie Won's computer was not working, and he called Geek Chic for a home repair visit. Geek Chic Company's technician arrived at 2:00PM to begin work. By 4:00PM the problem was diagnosed as a failed circuit board. Unfortunately, the technician did not have a new circuit borad in the truck, since the technician's previous customer had the same problem, and a board was never on that visit. Replacement boards were available back at Geed Chic Company's shop. Therefore, the technician drove back to the shop to retrieve a replacement board. From 4:00 to 5:00PM, Geed Chic Company's technician drove round trip to retrieve the replacement board from the shoop.

At 5:00PM the technician was back on the job at Obie's home. The replacement procedure is somewhat complex, since a variety of tests must be performed once the board is intalled. The job was completed at 6:00PM

Obie's repair bill shoed the following:

Circuit board: $100

Labor charges: $300

Total: $400

Obie was surprised at the size of the bill and asked for some greater detail supporting the calculations. Geek Chic Company responded with the folowing explanations:

Cost materials -

Purchase price of circuit board: $80

Markup on purchase price to cover storage and handling: $20

Total materials charge: $100

The labor charge per hour is detailed as follows

2:00-3:00PM: $70

3:00-4:00PM: $60

4:00-5:00PM: $80

5:00-6:00PM: $90

Total labor charge: $300

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

First hour:

Base labor rate..........$42

Fringe benefits...........$10

Overhead (other than storage and handling)..........$8

Total labor rate..........$60

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..........$10

New total..........$90

Third hour:

Base labor rate..........$60

The trip back to the shop includes vehicle depreciation and fuel; therefore, a charge was added to the hourly rate to cover tehse costs. The round trip took an hour.........$20

New total..........$80

Fourth hour:

Base labor rate..........$60

Overtime premium for time worked in excess of an eight-hour day (starting at 5:00PM) is equal to 1.5 times the base rate..........$30

New total..........$90

1. If you were in Obie position, how would you respond to the bill? Are there parts of the bill that appear incorrect to you? If so, what argument woul dyou employ to convince Geek Chic Company 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 a job.

Cost Direct Materials Direct Labor Overhead