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The Hillman Company sells and services lawn mowers, snow blowers, and other equipment. The service department uses a job order cost system to determine costs
The Hillman Company sells and services lawn mowers, snow blowers, and other equipment. The service department uses a job order cost system to determine costs of each job, such as oil changes, tune-ups, and repairs. The department assigns conversion costs through a cost driver rate on the basis of direct labor hours. the cost driver rate additionally includes a markup of 25% on the job's conversion costs in order to provide a reasonable profit for Hillman. The customer's invoice itemizes driver rate that includes direct labor costs, assigned overhead costs, and the 25% markup on conversion costs. Hillman Company's service department estimated the following information for 2006: Salaries and Mechanics - $120,000, Fringe Benefits - $54,000, General and Administrative - $18,000, Depreciation - $42,000, Billable Direct Labor Hours - $4,500
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