Question

If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?

Answer 1

Since the amount of money given for materials is 2.50 $, and labor cost is 3.00 $ so it’s overall 5.50 $. It will be sold for 8.00 $ and %30 of this amount will be reducted as direct labor costs, so only %70 of the price can be accessed. So %70 of the amount corresponds to 5.60 $. Since the overall cost was 5.50 $ and the net amount of sales is 5.60, 0.10 $ will be realized from this sale.