Question

Before the year​ began, McCrae, Inc. estimated its manufacturing overhead costs for the year to be ​$400 comma 000 and estimated that 10 comma 000 machine hours would be logged during production. The company uses machine hours to apply manufacturing overhead to production. During the​ year, the company received an order from a customer for 12 identical units of its most popular product.​ $1,000 in direct materials were requisitioned and​ $1,500 in direct labor costs were incurred during the production of the units. A total of 23 machine hours were logged during the production of the units. Assuming a sales price of $716, the gross profit reported on each unit in the order equals

Answer 1

Gross Profit = $5,172

Step-by-step explanation:

For the information provided,

Manufacturing overhead at an activity level of 10,000 machine hours = $400,000

Thus, overhead per hour = $400,000/10,000 = $40 per hour

Direct material = $1,000

Direct labor cost = $1,500

Total manufacturing cost allotted = $40
`*` 23 = $920

Total direct cost = $1,000 + $1,500 + $920 = $3,420

Sales revenue = $716
`*` 12 = $8,592

Gross profit = Sales - Cost = $8,592 - $3,420 = $5,172