Darrius Travel Services provided the following information:
Cost allocation rate for direct labour: $40 per hour Cost allocation rate for indirect costs: $22 per hour
Darrius is negotiating a job with a new client. The job will require 10 hours of direct labour. If Darrius wishes to make at least 15% gross profit on the deal, they need to receive $713 of revenues.

Question

Quizplus · Accepted Answer

The cost of direct labour is $40 per hour, and the job requires 10 hours of direct labour, so the cost of direct labour is $400. The cost of indirect costs is $22 per hour, and the job requires 10 hours of direct labour, so the cost of indirect costs is $220. The total cost of the job is $400 + $220 = $620. If Darrius wishes to make at least 15% gross profit on the deal, they need to receive $620 * 1.15 = $713 of revenues.

Darrius Travel Services Provided the Following Information