Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year are shown below: Other relevant information:
Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
Direct materials $400
Direct labour (100 hours) $1,500
-Refer to the table above. If the budgeted direct labour hours change to 25,000 hours, what will be the revised quote?

Question

Use the information below to answer the following questions.
Fingers Ltd, a graphic design service, has received an inquiry from a potential customer for a quotation for a web-page design. The pricing policy of the business is based on the budgeted financial data for the coming financial year. The data for the coming year are shown below:  Other relevant information:
Management has budgeted for 20,000 direct labour hours. Overhead is applied based on direct labour hours. An estimate for the direct costs of the job to be quoted on is shown below:
Direct materials $400
Direct labour (100 hours) $1,500
-Refer to the table above. If the budgeted direct labour hours change to 25,000 hours, what will be the revised quote?

Quizplus · Accepted Answer

The correct answer is A because the revised quote is calculated as follows:Revised quote = (Budgeted direct labour hours * Direct labour rate) + (Budgeted overhead rate * Budgeted direct labour hours)= (25,000 * $88) + (120% * 25,000 * $88)= $2,200,000 + $2,464,000= $4,664,000

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