Waterway Industries has the following budgeted costs for the next year: $200000

Question

Waterway Industries has the following budgeted costs for the next year:

$200000

$600000

Waterway Industriesbudgets 7500 hours of repair time and it desires a profit margin of $25 per hour of labor. A markup on material cost is assumed to be 50%. Waterway estimates that the repairs to a Cadillac Escalade damaged in an accident will take 45 hours of labor and $3500 in parts and materials. The total cost of the repairs is

Time Charges Material Charges Shop employees’ wages and benefits $130000 $- Parts manager’s salary and benefits - 35000 Office employee’s salary and benefits 45000 15000 Other overhead 25000 50000 Invoice cost of parts and materials - 500000 Total budgeted costs

$200000

$600000

Explanation / Answer

Solution:

Hourly labor rate for repairs Total Cost Total Hours Per Hour Charge

Technicians’ wages and benefits $130,000/7,500=$17.33

Overhead Costs

Office employee’s salary and benefits $45,000/7,500=$6.00

Other overhead $25,000/7,500=$3.33

$26.67

Profit Margin $25.00

Rate charges per hour of labor $51.67

Overhead costs Material Total Invoice Cost,parts and materials Material loading charge Parts manager’s salary and benefits $35,000

Office employee’s salary and benefits$15,000

$50,000/500,000=10%

Other Overhead $50,000/500,000=10%

20%

Profit Margin 50%

Material loading charge= 70%

Labor Charges

45 hours @ $51.67 per hour $2,325

Material Charges

Cost of parts and materials $3,500

Material loading charge (70% x $3,500) $5,250 $5,250

Total cost of repair $7,575

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