Boyle's Body Shop repairs automobiles that have been involved in collisions. It's budget information follows: Budgeted direct labor cost
$200,000
Budgeted overhead
500,000
Budgeted labor rate per hour
$10
Since all of Boyle's technicians are paid the same rate, Boyle allocates overhead to jobs based on direct labor hours. Paul Evans brought his car to Boyle for fender repair. It took 5 hours and the new parts for the job totaled $200. If Evans was charged $500, what was the percentage of profit to the selling price?

Question

Quizplus · Accepted Answer

Predetermined overhead rate = Budgeted overhead / Budgeted cost driver
Predetermined overhead rate = $500,000 / 20,000 direct labor hours* = $25 per hour.
Applied overhead = Predetermined overhead rate x actual cost driver for job
Applied overhead = $25 x 5 hours = $125.
* Budgeted direct labor cost / Budgeted labor rate = Budgeted direct labor hours
$200,000 / $10 = 20,000 hours
 11eb16ac_e000_166d_984d_97c844b9d406_TB6154_00 Profit for job = $500 - $375 = $125
Profit percentage = $125 / $500 = 25%

Boyle's Body Shop Repairs Automobiles That Have Been Involved in Collisions