Mazzoli Brothers is an auto repair shop. Mazzoli's cost accounting system tracks two cost categories: direct labour
Question:
Johanna White brings her car to the shop. The head mechanic, Luke Bariess, concludes her car's problem is with the clutch plate. He considers two options: replace the clutch plate or repair it. The cost information available to Bariess follows:
Required
1. Why might Mazzoli use different markup rates for direct materials and for direct labour?
2. If Bariess presents White with the replace or repair options, what price would he quote for each?
3. If the two options were equally safe and effective for the three years that White intends to use the car before junking it, which option would she choose?
4. If Bariess's objective is to maximize profits, which option would Bariess recommend to White? Is this the option chosen by White in requirement 3? Comment on your answers in requirements 3 and 4.
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
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