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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 42,000 $ 693,000 $ 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 waterials Direct labor cost Direct labor-hours used $ 660 $ 175 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 60% of its total job cost, then how much would it have charged Mr. Wilkes? Complete the question by entering your answers in the tabs given below. Required 1 Required 2 Required 3 Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

Answer 1

1	Computation of Predetermined Overhead rate
		Fixed Overhead rate = Total Fixed Overhead Cost/ Estimated Direct Labour
			=693000/42000 =		$    16.50	per hour
		Variable Overhead Rate = $1 per hour
		Total Overhead Rate = Fixed Overhead rate + Variable Overhead = $16.5 per hour + $1 per hour = $17.5 per hour
2	Mr Wilkes' total job cost
	Direct Material		660
	Direct Labour		175
	TotalOverhead applied ($17.5*10 hours)		175
	Total cost assigned		1010
3	Amount charged to Mr Wilkes' = Total cost + Mark-up = $1010+$1010*60% = $1616

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