Reference no: EM132581125

Bundy Car Mechanic Inc. uses a job-order costing system. The company applies all of its overhead costs to jobs using a predetermined overhead rate based on direct labor-hours. At the beginning of the year, it made the following estimates:

Direct labor-hours required to support estimated output 40,000

Fixed overhead cost $640,000

Variable overhead cost per direct labor-hour $1.00

During the year, a customer brought in her car for repairs. The following information was available with respect to the car's repairs:

Direct materials $707

Direct labor cost $230

Direct labor-hours used 9

Question 1 : If Bundy sets its selling prices by adding a markup percentage of 50% of its total job cost, then how much would Bundy have charged this customer for her car's repairs?

Multiple Choice

Option 1: $937

Option 2: $2,295

Option 3: $1,635

Option 4: $1,090