If one unit of Product X used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?
A) $8.00.
B) $5.50.
C) $2.50.
D) $1.60.
E) $0.90.

Question

Quizplus · Accepted Answer

Gross profit is calculated as Sales - Cost of Goods Sold (COGS). COGS includes direct materials, direct labor, and overhead. Direct materials cost $2.50, direct labor cost $3.00, and overhead is 30% of direct labor ($3.00 * 0.30 = $0.90). Total COGS is $2.50 + $3.00 + $0.90 = $6.40. Gross profit is $8.00 (sales) - $6.40 (COGS) = $1.60.

If One Unit of Product X Used $2