Pluto Travel Services provided the following information
Direct labor rate: $40 per hour
Predetermined overhead allocation rate for indirect costs: $21 per direct labor hour
Pluto is negotiating a job with a new client. The job will require 10 hours of direct labor. If Pluto wishes to have at least a 15% gross profit on the revenues, it needs to earn $713 of revenues.
Indicate whether the statement is true or false
FALSE .Costs:
Direct labor ($40 x 10 hours) $400
Indirect labor ($21 x 10 hours) 210
Total costs 610
Revenues - Total Costs = Gross Profit
If Revenues = X then,
X - $610 = 0.15X
Or, 0.85X = $610
Therefore, X = 717.65
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