Homework Answers
Answer: A. $1,337.00
Explanation
| Calculation of Gross Profit | |
| Total compensation to specialists | $ 663,000.00 |
| Total number of hours billed by specialists | 7,800.00 |
| Cost allocation rate per hour ($663,000/7,800) | $ 85.00 |
| Office and administrative costs per year | $ 390,000.00 |
| Total number of hours billed by specialists | 7,800.00 |
| Cost allocation rate used for office and administrative costs | $ 50.00 |
| ($390,000/7,800) | |
| Revenue | $ 6,400.00 |
| Less costs: | |
| Direct labor (37.5 x $85) | (3,188.00) |
| Indirect labor (37.5 x $50) | (1,875.00) |
| Gross profit | $ 1,337.00 |
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