Chapter 3 Product Costing and Cost Accumulation in a Batch Production Environmen

Question

Chapter 3 Product Costing and Cost Accumulation in a Batch Production Environment Exercise 3-37 Contemporary Trends is an interior decorating firm in Munich. The following costs were incurred in the Project Costing, Int firm's contract to redecorate the mayor's offices. Decorating 8,0000 LO 3-1,3-8) 15,000 Direct material used Direct professional labor The firm's budget for the year included the following estimates 600,000 400,000 Budgeted direct professional labor Overhead is applied to contracts using a predetermined overhead rate calculated annually. The rate is based on direct professional labor cost. Required: Calculate the total cost of the firm's contract to redecorate the mayor's offices. (Remember to express your answer in terms of euros. On the day this exercise was written the euro was valuedat 1.3673 U.S. dollars.)

Explanation / Answer

Predetermined overhead rate = Budgeted overhead/Budgeted direct professional labor = €600000/€400000 = 150% of direct professional labor cost.

Note: Kindly re-confirm whether direct materials is €8,0000 or €8,000 prior to submission since the comma seems incorrectly placed.

Direct materials € 80,000 Direct professional labor € 15,000 Overheads (150% x €15000) € 22,500 Total cost € 117,500

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