Mumbai Travel Services provided the following information:
Direct labor rate: $40 per hour
Predetermined allocation rate for indirect costs: $22 per direct labor hour
If Mumbai Travel records revenue of $350 for a job requiring 5 hours of direct labor,then Mumbai Travel will make a profit of $40.

Question

Quizplus · Accepted Answer

Direct labor cost for the job would be 5 hours x $40 per hour = $200. 
Indirect cost allocated to the job would be 5 hours x $22 per direct labor hour = $110. 
Total cost for the job would be $200 + $110 = $310. 
Profit would be revenue of $350 - cost of $310 = $40. Therefore the answer is True.

Mumbai Travel Services Provided the Following Information