Question

If one unit of Product Z2 used $1.70 of direct materials and $3.70 of direct labor, sold for $10.00, and was assigned overhead at the rate of 22% of direct labor costs, how much gross profit was realized from this sale? (Round your intermediate calculations and final answer to two decimal places.) a. $5.40. b. $3.79. c. $.81. d. $4.60. e. $10.00.

Answer 1

The correct answer is B

Step-by-step explanation:

The gross profit is computed as:

Gross Profit (GP) = Selling price - Expense

where

Selling price amounts to $10.00

Expenses involve DM (Direct Material), DL (Direct Labor) and Overhead

So,

DM amounts to $1.70

DL amounts to $3.70

And

Overhead = 22 % of direct labor

= 22% × $3.70

= $0.814

Putting the values above:

GP = $10.00 - ($1.70 + $3.70 + $0.814)

GP = $10.00 - $6.214

GP = $3.786 or $3.79