Speedy Auto Repairs uses a job costing system. The company's direct materials consist of parts installed on customers' vehicles, and its direct labor consists of the mechanics' hourly wages. Speedy's overhead costs include various items such as the store manager's salary, equipment depreciation, utilities, insurance, and magazine subscriptions and waiting room snacks.

The company applies all of its overhead costs to jobs based on direct labor hours. At the beginning of the year, he made the following estimates:

Direct labor hours required to support estimated production		24,000
fixed fixed cost	ps	288,000
Variable overhead cost per direct labor hour	ps	1.00

Required:

1. Calculate the default overhead rate.

2. During the year, Mr. Wilkes brought in his vehicle to have the brakes, spark plugs, and tires replaced. The following information was available regarding his work:

Direct materials	ps	615
Direct labor cost	ps	208
Direct labor-hours used		9

Calculate the total cost of Mr. Wilkes's work.

3. If Speedy sets his sales prices using a markup percentage of 50% of the total cost of his work, how much would he have charged Mr. Wilkes?

Answer rating: 100% (QA)

The default overhead rate is calculated as follows Default ov... View the full answer