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Job Costing

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

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November 2, 2014 at 12:45 am #207156
Shanda
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A business operates a job costing system and has the aim of making a net profit of 30% of sales. The cost estimates for one particular job are as follows:
Direct materials: 80 kg at $5 per kg
Direct Labour: 40 hours at $6 per hour
The total overheads are budgeted at $120,000 and are absorbed on the basis of direct labour hours. The budgeted labour hours are 50,000. What price should be quoted for this job?
Can I see the calculation for this question please?
November 2, 2014 at 10:25 am #207211
John Moffat
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The overhead absorption rate is 120,000 / 50,000 = 2.40 per hour.
So the total cost is (80 x $5) + (40 x $6) + (40 x $2.40) = $736
Profit is to be 30% of sales, which means cost is 70% of sales.
So selling price is 736 / 70% = $1,051
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