CA Intermediate · Cost and Management Accounting · Job Costing
Gupta Printers quotes jobs at cost plus 25% on selling price. Job P-7 has direct material Rs 24,000, direct labour Rs 16,000 and overheads absorbed at 50% of direct labour. What is the quoted price?
The quoted price is Rs 64,000. Total cost is Rs 48,000, and since profit is 25% of selling price, cost is 75% of price, giving 48,000 divided by 0.75. Adding 25% on cost would wrongly give Rs 60,000.
- ARs 60,000Correct
- BRs 62,500
- CRs 64,000
- DRs 75,000
Explanation
Overheads = 50% of 16,000 = Rs 8,000. Cost = 24,000 + 16,000 + 8,000 = Rs 48,000. Profit is 25% of selling price, so cost is 75% of price. Price = 48,000/0.75 = Rs 64,000. Check: 25% of 64,000 = 16,000 and 64,000 - 16,000 = 48,000. So the answer is Rs 64,000 (option index 2); the 25% on cost figure of Rs 60,000 is the distractor.
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