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: Direct labor-hours required to support estimated output Fixed overhead cost Variable overhead cost per direct labor-hour ............... 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....... $590 $109 3. Compute Mr. Wilkes' total job cost. 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? EXERCISE 3-1 Prepare Journal Entries LO3-1 Larned Corporation recorded the following transactions for the just completed month. a. $80,000 in raw materials were purchased on account. b. $71.000 in raw materials were used in production of this amount. $62,000 was for direct materials and the remainder was for indirect materials. c. Total labor wages of $112,000 were paid in cash. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor. d. Depreciation of $175,000 was incurred on factory equipment. Required: Record the above transactions in journal entries