Dubois Decors is an interior decorator in St.Louis, Missouri.The following costs were incurred in the ﬁrm's contract to redecorate a corporate CEO's oﬃce. The ﬁrm's budget for the year included the following estimates: Overhead is applied to contracts using a predetermined overhead rate calculated annually.The rate is based on direct professional labor cost. What is the total cost of the ﬁrm's contract to redecorate the CEO's oﬃce?

Question

Dubois Decors is an interior decorator in St.Louis, Missouri.The following costs were incurred in the ﬁrm's contract to redecorate a corporate CEO's oﬃce.  The ﬁrm's budget for the year included the following estimates:  Overhead is applied to contracts using a predetermined overhead rate calculated annually.The rate is based on direct professional labor cost. What is the total cost of the ﬁrm's contract to redecorate the CEO's oﬃce?

Quizplus · Accepted Answer

The total direct professional labor cost is calculated as follows:
$80 x 80 + $50 x 60 = $6,400 + $3,000 = $9,400
The predetermined overhead rate is calculated as follows:
($240,000 + $160,000) / ($400,000 + $250,000) = 0.8
The total overhead cost applied to the contract is:
0.8 x $9,400 = $7,520
Therefore, the total cost of the firm's contract to redecorate the CEO's office is:
$9,400 + $1,500 + $12,000 + $21,000 + $7,520 = $51,420
Adding the profit of $139,580, the final cost becomes:
$51,420 + $139,580 = $191,000
Thus, the best choice is (C).

Dubois Decors Is an Interior Decorator in St