I am having the hardest time in this class. The book we are using is really not helpful and does not give very detail examples. Can someone please please help me. I am so confused with this.:confused:

The cost driver rate additionally includes a markup of 25% on the job's conversion cost in order to providaeresasonable profit for the company. The customers invoice itemizes prices for parts and labor, where the stated labor rate is the departments cost driver rate that includes direct labor cost, assigned overhead costs and the 25% markup on conversion cost.

Salaries of mechanices $120,000
Fringe benefits 54,000
General & administrative 18,000
Depreciation 42,000
Billable direct labor hrs 4,500

Job 254 required $47.40 of materials and 0.7 direct labor hours. Determine the price charged for job 254.

Here is how I think the problem should be solved. I would divide 4500/0.7 = 64.28. Then I would add 47.40 and 64.28 to get the total of 112.20.

I am correct or far off??????????

You have divided the billable labor hours with the labor hours used on Job 254.

First calculate the charge out rate as follows:
Conversion costs:
Salaries of mechanics $120,000
Fringe benefits 54,000
Depreciation 42,000
Total conversion costs $216,000
Total billable hours 4,500
Rate per billable hour...... $48 - ($216,000/4,500)
Markup 25% ($48 x 25%) $12
Chargeable rate per hour $60

Job 254
Direct materials .............$47.40
Conversion costs 0.7 x 60 42.00
Total .............................$89.40

Please note general and administration overheads will not be used in calculating the rate since it will be covered by the mark up on conversion costs.