Honest Auto Repairs is a service firm that uses a job costing system. Direct labor consists of mechanics' pay. Direct materials consist of auto parts. Manufacturing overhead costs include items such as the shop manager's salary, utilities, insurance and other sundry indirect costs. As the shop is highly labor-intensive, Honest Auto Repairs has decided to apply manufacturing overhead on the basis of direct labor hours.
The following estimates for the coming year were made at the start of the year:
a. Determine the Budgeted MOH rate.
b. A long-time customer scheduled work to be done on her vehicle. Honest Auto Repairs, recorded the work on job cost sheet 1402. The following cost information was recorded on this customer's job.
Determine the cost of this customer's repair job.
c. If Honest Auto Repairs maintains a markup of 130% of manufacturing cost, what amount will the customer be billed for?
d. Calculate the gross margin that Honest Auto earned on this particular repair job.

Question

Honest Auto Repairs is a service firm that uses a job costing system. Direct labor consists of mechanics' pay. Direct materials consist of auto parts. Manufacturing overhead costs include items such as the shop manager's salary, utilities, insurance and other sundry indirect costs. As the shop is highly labor-intensive, Honest Auto Repairs has decided to apply manufacturing overhead on the basis of direct labor hours.
The following estimates for the coming year were made at the start of the year:
  a. Determine the Budgeted MOH rate.
b. A long-time customer scheduled work to be done on her vehicle. Honest Auto Repairs, recorded the work on job cost sheet 1402. The following cost information was recorded on this customer's job.
  Determine the cost of this customer's repair job.
c. If Honest Auto Repairs maintains a markup of 130% of manufacturing cost, what amount will the customer be billed for?
d. Calculate the gross margin that Honest Auto earned on this particular repair job.

Quizplus · Accepted Answer

The Answer of Honest Auto Repairs is a service firm that uses a job costing system. Direct labor consists of mechanics' pay. Direct materials consist of auto parts. Manufacturing overhead costs include items such as the shop manager's salary, utilities, insurance and other sundry indirect costs. As the shop is highly labor-intensive, Honest Auto Repairs has decided to apply manufacturing overhead on the basis of direct labor hours.
The following estimates for the coming year were made at the start of the year:
  a. Determine the Budgeted MOH rate.
b. A long-time customer scheduled work to be done on her vehicle. Honest Auto Repairs, recorded the work on job cost sheet 1402. The following cost information was recorded on this customer's job.
  Determine the cost of this customer's repair job.
c. If Honest Auto Repairs maintains a markup of 130% of manufacturing cost, what amount will the customer be billed for?
d. Calculate the gross margin that Honest Auto earned on this particular repair job.

Honest Auto Repairs Is a Service Firm That Uses a Job