Question

Hansel Corporation has requested bids from several architects to design its new corporate headquarters. Frey Architects is one of the firms bidding on the job. Frey estimates that the job will require the following direct labor.
Labor Estimated Hours Hourly Rate
Architects 176 $ 300
Staff 352 75
Clerical 825 20

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $40,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $298,000 and $376,000 for the job.


1. What is Frey’s estimated cost of the architectural job?
2. If Frey bids a price of $298,000, will it earn its target profit of $40,000?
3. What is Frey’s Estimated selling price?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Frey estimates that the job will require the following direct labor.

Labor Estimated Hours Hourly Rate

Architects 176 $ 300= 52,800

Staff 352 75= 26,400

Clerical 825 20= 16,500

Total direct labor= 95,700

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $40,000 profit on the architectural job.

1) Total cost= 95,700 + (95700*1.75)= $263,175

2) Bidding price= 263,175 + 40,000= $303,175

If they bid with $298,000 it won't reach $40,000 profit.

3) Bidding price= 263,175 + 40,000= $303,175