Compute the amount of gross profit from the sales in July. (Hint: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Gross profit = $790000

Explanation:

Suppose:

Sales = 1000000

Cost of goods sold = 200000

Actual overhead = 100000

Direct labor used = 15000 hours

Predetermined rate = $ 6 per hour

Computation of gross profit:

         Sales =                                                                             1000000

less: Cost of goods sold                    =200000      

Add: under applied overhead (w#1) = 10000

                                                                                                 (210000)

                Gross profit                                                              790000

(w#1) Applied overhead = Actual labour hours * predetermined rate

                                         = 15000 * 6 = $90000.

   Actual overhead                              =  100000

Under applied overhead                          10000

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