Dezire Travel Services provided the following information:
Direct labor rate: $86 per hour
Predetermined allocation rate for indirect costs: $15 per direct labor hour
If Dezire records revenue of $1,800 for a job requiring 10 hours of direct labor,then Dezire will make a profit of $940.

Question

Quizplus · Accepted Answer

We can use the following equation to calculate the total cost of the job:
Total cost = Direct labor cost + Indirect cost
Direct labor cost = Direct labor rate x Direct labor hours = $86 x 10 = $860
Indirect cost = Predetermined allocation rate x Direct labor hours = $15 x 10 = $150
Total cost = $860 + $150 = $1,010

Since revenue is given as $1,800, we can calculate the profit as:
Profit = Revenue - Total cost = $1,800 - $1,010 = $790

Therefore, the given statement is false.

Dezire Travel Services Provided the Following Information