Question

Auto Safe's job cost sheet for Job A40 shows that the total cost to add security features to a car was $17,000. The car was delivered to the customer, who paid $21,700 cash for this job. What is the amount of gross profit recognized on Job A40?

a. $4,700
b. $17,000
c. $21,700
d. $0

Answer 1

The gross profit for Job A40 is calculated by subtracting the total cost of services ($17,000) from the cash received from the customer ($21,700), resulting in a gross profit of $4,700 (option a.) for Auto Safe.

Step-by-step explanation:

The question refers to calculating the gross profit for Job A40 completed by Auto Safe. To find the gross profit, we subtract the total cost of the job from the cash received from the customer. So, if the total cost to add security features to a car was $17,000 and the customer paid $21,700 cash for this job, the gross profit can be calculated as follows:

Gross profit = Sales - Cost of Goods Sold (COGS)

Here, Sales = $21,700 (cash paid by the customer)

COGS = $17,000 (total cost to add security features)

Therefore, Gross profit = $21,700 - $17,000 = $4,700.

The correct answer to this question is a. $4,700, which is the amount of gross profit recognized on Job A40. This means that Auto Safe earned $4,700 above the cost of the services provided to enhance the car's security features.