Wilson Custom Cabinetry makes cabinets to order and prices t

Wilson Custom Cabinetry makes cabinets to order and prices the completed jobs at product cost plus 40%. Recently, Wilson finished a job and billed the customer $560. If direct materials for the job cost $130, and direct labor cost $180, what was the applied overhead for the job??

a) 90

b)179

c)400

d)250

e)350

Solution

Option A. $90

Computation of Cost = Billed Amount / (1 + Profit)

Cost = $560 / (1.40)

Cost = $400

Applied OH = Cost - Materials - Labor = $400 - $130 - $180 = $90