Math Problem Statement
Job costing for services
The Hillman Company sells and services lawn mowers, snowblowers, and other equipment. The service department uses a job order cost system to determine the cost of each job, such as oil changes, tune-ups, and repairs. The department assigns conversion costs through a cost driver rate on the basis of direct labor hours. The cost driver rate additionally includes a markup of 25% on the job's conversion costs in order to provide a reasonable profit for Hillman. The customer's invoice itemizes prices for parts and labor, where the stated labor rate is the department's cost driver rate, which includes direct labor costs, assigned overhead costs, and the 25% markup on conversion costs. Hillman's service department estimated the following information for the current year:
Salaries of mechanics $120,000 Fringe benefits 54,000 General and administrative 18,000 Depreciation 42,000 Billable direct labor hours 4,500
Required
(a) Determine Hillman's service department's cost driver rate for assigning conversion costs based on billable direct labor hours. Note: Enter per billable DL hour answers in dollars and cents, rounding to the nearest cent when applicable. Total conversion costs Answer 1 Conversion cost per billable DL hour Answer 2 Cost driver rate per billable DL hour Answer 3
(b) Job 254 required $47.00 of materials and 0.7 direct labor hours. Determine the price charged for job 254. Note: Enter amount in dollars and cents, rounding to the nearest cent when applicable. $Answer 4
Solution
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Math Problem Analysis
Mathematical Concepts
Cost Accounting
Job Order Costing
Conversion Costs
Markup Calculations
Formulas
Total Conversion Costs = Sum of Expenses
Conversion Cost per Billable DL Hour = Total Conversion Costs / Billable DL Hours
Cost Driver Rate = Conversion Cost per Billable DL Hour + Markup
Theorems
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Suitable Grade Level
Professional
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