If one unit of Product X used $1.5 of direct materials and $2 of direct labor, sold for $11, and was assigned overhead at the rate of 20% of direct labor costs, how much gross profit was realized from this sale?
a.$11 b.$7.5 c.$4.6 d.$7.10 e.$3.5
To calculate the gross profit, we need to find the total cost of producing one unit of Product X and subtract it from the selling price.
The direct materials cost for one unit of Product X is $1.5, and the direct labor cost is $2. So, the total direct cost for one unit is $1.5 + $2 = $3.5.
The overhead is assigned at a rate of 20% of the direct labor costs. Since the direct labor cost is $2, the overhead assigned to one unit is 20% of $2, which is 20/100 * $2 = $0.4.
So, the total cost of producing one unit, including direct costs and allocated overhead, is $3.5 + $0.4 = $3.9.
The selling price for one unit is $11.
Therefore, the gross profit realized from this sale is the selling price minus the total cost, which is $11 - $3.9 = $7.1.
Therefore, the correct answer is d. $7.10.