Problem 2-20 (Algo) Job-Order Costing for a Service Company [LO2-1, LO2-2, LO2-3]

Speedy Auto Repairs uses job-order costing. Its direct materials consist of replacement parts installed in customer vehicles, and its direct labor consists of the mechanics hourly wages. Speedys overhead costs include various items, such as the shop managers 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 output32,000Fixed overhead cost$ 448,000Variable overhead cost per direct labor-hour$ 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 pertains to his job:

Direct materials$ 609Direct labor cost$ 166Direct labor-hours used5

Compute Mr. Wilkes total job cost.

1. If Speedy establishes selling prices using a markup percentage of 50% of its total job cost, then how much would it have charged Mr. Wilkes?