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19 September, 12:47

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.)

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  1. 19 September, 12:59
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    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
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