Question

Labor costs of an auto repair mechanic are seldom based on actual hours worked. Instead, this labor cost is based on an industry average of time estimated to complete a repair job. This means a customer can pay, for example, $120 for two hours of work on a car when the actual time worked was only one hour. Many experienced mechanics can complete repair jobs faster than the industry average. Assume that you are asked to complete such a survey for a repair center. The survey calls for objective input, and many questions require detailed cost data and analysis. The mechanics and owners know you have the survey and encourage you to complete it in a way that increases the average billable hours for repair work.

Required

Write a one-page memorandum to the mechanics and owners that describes the direct labor analysis you will undertake in completing this survey.

Short answer

Memorandum is prepared in Step 2.

Step-by-step solution

Meaning of memorandum

A memorandum may be a report that's made particularly for an individual or committee to allow them data about a certain subject.

Writing a memorandum

MEMORANDUM

To:"Mechanics" and "Owners"

From: Your name

RE:Analysis of labour costs for survey

Date: Current date

The memorandum should include many of the following points:

Objectivity: Adeclaration emphasising the need for objectivity in analysing the preparer's quest for neutrality should be driven by professional and ethical considerations.

Cost Accounting Estimation: The memo should enlighten how cost estimation is carried out. You'll, for instance, clarify how relapse examination was utilised to decide the typical time required to achieve certain assignments. Describe why the time value must be reported is such an exact estimate. The proficient code of ethics would be broken if a longer time value was detailed.

Business Concerns: The memo should make clear that when estimating costs, the repair company must adhere to accepted business procedures. Fairness for the

client in receiving a fair value for the amount paid should also be a stated concern. Another issue is the potential notion that the repair company often overcharges the client and that something should be done about it. Paying for the time that was never used and paying the mechanic based on the number of jobs done is both unfair to the customer and the mechanic. Perhaps the mechanic's compensation scheme has to be altered.

Mechanic-Related Issues: The mechanical work's quality should also be considered for the memo. Paying the mechanic on a job-by-job basis, is the work being done appropriately, and is the safety of the consumer at risk? Who is in charge of creating a just compensation structure? These problems are likely to be covered in the memo.