Accounting 25th Edition by Carl Warren, James Reeve, Jonathan Duchac

Exercise 4

Classifying costs
Geek Chic Company provides computer repair services for the community. Obie Won's computer was not working, and he called Geek Chic for a home repair visit. Geek Chic Company's 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 Geek Chic Company's shop. Therefore, the technician drove back to the shop to retrieve a replacement board. From 4:00 to 5:00 P.M. , Geek Chic Company'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 Obie'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.
Obie's repair bill showed the following:

Obie was surprised at the size of the bill and asked for some greater detail supporting the calculations. Geek Chic Company responded with the following explanations:

The labor charge per hour is detailed as follows:

Further explanations in the differences in the hourly rates are as follows:

1. If you were in Obie's position, how would you respond to the bill Are there parts of the bill that appear incorrect to you If so, what argument would you employ to convince Geek Chic Company that the bill is too high
2. 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.