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Good morning Sir, Can you help me please?
1. A business operates a job costing system and has the aim of making a net profit of 30% on sales. The cost estimates for one particular job are as follows:
Direct materials 80kg 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 (to the nearest $)?
You do not say which part is causing you a problem.
The materials are $400 (80 x 5)
The labour is $240 (40 x 6)
Overheads are charged at 120000/50000 = $2.40 per hour.
So the overheads for the job are 40 x $2.40 = $96This means that the total cost is 400 + 240 + 96 = $736
Since they want the profit to be 30% of sales, it means that the cost will have to be 70% of sales and so the selling price will have to be 736 / 70% = $1,051 (to the nearest $)
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