Question

1. Castlegar Tire & Muffler charges customers $100 an hour for work performed. This hourly rate covers employee wages ($35 an hour) and overhead ($22 an hour). They also charge materials at 20% above cost. Job #1817 required $125.50 in materials and 2.5 hours of work.

1. What is the total cost of job # 1817?

2. What was the customer charged for job #1817

3. What was the gross profit in dollars for job #1817? As a percent of cost?

Answer 1

1

Computation of Total cost of job #1817

Particulars	Amount ($)
Direct materials	125.50
Employee wages ($35 X 2.5 hours)	87.50
Overhead ($22 X 2.5 hours)	55
Total cost of job #1817	$268

2

Computation of amount charged from customer for job #1817

Particulars	Amount ($)
Direct materials ($125.50 + 20%)	150.60
Service charges ($100 X 2.5 hours)	250
Customer charged for job #1817	$400.60

3

Gross profit = (Customer charged - Total cost)
=> ($400.60 - $268)
=> $132.60 (Ans)
Gross profit as a percentage of cost = [(Gross profit / Total cost) X 100]
=> [($132.60 / $268) X 100]
=> 49.48% (Ans)

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