Job No. 47 requires direct material of ₹18,500 and 120 direct labour hours at ₹150 per hour. Factory overheads are absorbed at ₹90 per direct labour hour and administration overheads at 10% of works cost. The company prices jobs to earn a profit of 20% on the selling price. The price to be quoted is:

Correct answer: D) ₹65,037.50

Explanation

Direct labour = 120 x ₹150 = ₹18,000. Factory overheads = 120 x ₹90 = ₹10,800. Works cost = ₹18,500 + ₹18,000 + ₹10,800 = ₹47,300. Administration overheads 10% = ₹4,730; total cost = ₹52,030. Profit is 20% of price, so price = ₹52,030 / 0.80 = ₹65,037.50. A 20% mark-up on cost would give only ₹62,436.00.