Problem 3-37 Contemporary Trends is an interior decorating firm in Munich. The f

Question

Problem 3-37
Contemporary Trends is an interior decorating firm in Munich. The following costs were incurred in the
firm’s contract to redecorate the mayor’s offices.
Direct material used ...................................................................................................................................... € 4,100
Direct professional labor ................................................................................................................................ € 7,000
The firm’s budget for the year included the following estimates:
Budgeted overhead .................................................................................................................................... € 510,000
Budgeted direct professional labor .............................................................................................................. € 300,000
Overhead is applied to contracts using a predetermined overhead rate calculated annually. The rate is
based on direct professional labor cost.
Required: Calculate the total cost of the firm’s contract to redecorate the mayor’s offices. (Remember
to express your answer in terms of euros. On the day this exercise was written the euro was valued at
1.2905 U.S. dollars.)

Explanation / Answer

Particulars Amount in Euros Direct Material Used 4100 Direct Professional Labour 7000 Overhead rate 11900 (510000/300000*7000) Total Cost to the firm 23000 (In Euros) Dollars Conversion rate 1.2905 Total Cost to the firm 29682 (In Dollars)

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