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Kelly Technology makes home office furniture from fine hardwoods. The company operates two departments, the preparation department and the fabrication department. Overhead costs are applied to jobs from each department, using machine hours as the activity level for the preparation department and direct labor hours as the activity level for the fabrication department. At the beginning of 2008, the company's management made the following estimates:
Preparation Department Fabrication Department Overhead cost $432,000 $702,000 Machine hours 90,000 25,000 Direct labor hours 35,000 65,000 In April, Kelly began working on Project 10. Project 10, which was completed in May, consisted of 100 units. The company's cost records show the following information concerning Project 10: Preparation Department Fabrication Department Direct material cost $940 $1,200 Direct labor cost $710 $980 Machine hours 350 80 Direct labor hours 70 150 During June, Kelly sold 60 units from Project 10 to a customer.
It is the policy of Project 10 to charge customers a price of 150% of total manufacturing costs for all jobs. Calculate the amount of gross profit earned by Kelly from the sale of the 60 units. Do not use decimals in your answer.
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