Compute the amount of gross profit from the sales in July. (Hint: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Gross profit = $790000

Explanation:

Suppose:

Sales = 1000000

Cost of goods sold = 200000

Actual overhead = 100000

Direct labor used = 15000 hours

Predetermined rate = $ 6 per hour

Computation of gross profit:

Sales = 1000000

less: Cost of goods sold = 200000

Add: under applied overhead (w#1) = 10000

(210000)

Gross profit 790000

(w#1) Applied overhead = Actual labour hours * predetermined rate

= 15000 * 6 = $90000.

Actual overhead = 100000

Under applied overhead 10000