The budget for Klunker Auto Repair Shop for the year is as follows:
Direct labor per hour -------------------- $30
Total labor hours -------------------------- 10,000
Overhead costs:
Material handling and storage ------$10,000
Other -----------------------------------------$120,000
Direct material cost ----------------------$500,000
Klunker allocates materials handling and storage costs per dollar of direct material cost. Other overhead is allocated based on total labor hours. In addition, Klunker adds a charge of $8 per labor hour to cover profit margin. Tardy Trucking Co. has brought one of its trucks to Klunker for an engine overhaul. If the overhaul requires twelve labor hours and $800 parts, what price should Klunker charge Tardy for these repair services?
a. $1,160
b. $1,256
c. $1,415
d. $1,472
Answer: D
CPA Exam
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