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Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer games. The games are sent directly to Star, and after the games are repaired, Star bills the game manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts (replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500, and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled $52,500. Overhead incurred was $121,000. a. What was the cost of materials used for repair work during the month of February? b. What was the prime cost for February? c. What was the conversion cost for February? d. What was the total repair cost for February?

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Answer:

a. What was the cost of materials used for repair work during the month of February?

To find this figure, we add the purchased replacement parts value with the beginning inventory parts value, and substract the ending inventory parts.

Cost of materials = $97,000 + $38,500 - $15,250

                            = $120,250

b. What was the prime cost for February?

The prime cost is the sum of cost of materials and cost of labor.

Prime cost = $120,250 + $52,500

                  = $172,750

c. What was the conversion cost for February?

Conversion cost is the sum of the cost of labor and overhead.

Conversion cost = $52,500 + $121,000

                           = $173,500

d. What was the total repair cost for February?

The total repair cost is the sum of parts cost, labor costs, and overhead.

Total repair cost = $120,250 + $52,500 + $121,000

                           = $293,750

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