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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Classifying costs
Reboot Inc. provides computer repair services for the community. Ashley DaCosta's computer was not working, and she called Reboot for a home repair visit. The Reboot Inc. technician arrived at 2:00 p.m. to begin work. By 4:00 p.m.. the problem was diagnosed as a failed circuit board. Unfortunately, the technician did not have a new circuit board in the truck, since the technician's previous customer had the same problem, and a board was used on that visit. Replacement boards were available back at Reboots shop. Therefore, the technician drove back to the shop to retrieve a replacement board. From 4:00 to 5:00 p.M., Reboot's technician drove the round trip to retrieve the replacement board from the shop.
At 5:00 p.m., the technician was back on the job at Ashley's home. The replacement procedure is somewhat complex, since a variety of tests must be performed once the board is installed. The job was completed at 6:00 p.m.
Ashley's repair bill showed the following:

Ashley was surprised at the si2e of the bill and asked for some greater detail supporting the calculations. Reboot responded with the following explanations:

The labor charge per hour is detailed as follows:


Use the headings below to construct a table. Fill in the table by first listing the costs identified in the activity in the left-hand column. For each cost, place a check mark in the appropriate column identifying the correct cost classification. Assume that each service call is a job.

To determine

Concept introduction:

Cost classification:

The expenses incurred in the repairing and maintenance is the cost which should be classified in terms of direct material, direct labor, and overhead as to eliminate any extra cost which is charged separately even after including in such heads.

The cost classification of each service call.

Explanation

The table showing the cost classification is as follows:

    CostDirect MaterialDirect LaborOverhead
    Circuit BoardYes
    Storage and handling Yes
    LaborYes

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