Special Carpets specializes in making carpets of high quality materials. The com

Question

Special Carpets specializes in making carpets of high quality materials. The company applies overhead
costs to jobs on the basis of direct labor hours. For the current year, total manufacturing overhead was
expected to cost $50,000. The total expected direct labor hours were anticipated to be 8,000. The
company was working on job #1002, a special-command carpet for President Trump. The following
costs were incurred:
Direct Materials: $12,000
Machine hours: 30 labor hours – wage rate of $16 per hour.
Required:
a.) Determine the cost of the job.
b.) Assuming the company charges President Trump $35,000 for the carpet, how much gross
profit will have been earned on Job #1002?

Explanation / Answer

a Direct materials 12000 Direct labor 480 =30*16 Overhead 187.5 =50000/8000*30 Cost of the job 12667.5 or $12668 b Gross Profit = 35000-12667.5= $22332.5 or $22333

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