Question

As a service to its customers, Current Designs repairs damaged kayaks. This is especially valuable to customers that have made a significant investment in the composite kayaks. To price the repair jobs, Current Designs uses time-and-material pricing with a desired profit margin of $30 per labor hour and a 35% materials loading charge. Recently, Bill Johnson, Vice President of Sales and Marketing, received a phone call from a dealer in Brainerd, Minnesota. The dealer has a customer who recently damaged his composite kayak and would like an estimate of the cost to repair it. After the dealer emailed pictures of the damage, Bill reviewed the pictures with the repair technician and determined that the total materials charges for the repair would be $120. Bill estimates that the job will take 5 labor hours to complete. Following is the budgeted cost data for Current Designs: Repair technician wages $32,200 Fringe benefits $11,500 Overhead $11,500 Current Designs has allocated 2,300 hours of repair time for the upcoming year. The customer has agreed to transport the kayak to the Winona production facility for the repairs. Determine the price that Current Designs would charge to complete the repairs for the customer.

Answer 1

Answer:

Minnesotta customer repair charged: $407

Explanation:

Material $120 x 35% = $ 42

Labor 5 hours x $30 = $150

Total Margin:                $ 192

labor rate per hour:

$( 32,200 + 11,500) / 2,300 hours =   $19 per hour

5 hours x $19 = $95

Overhead per labor hour:

$ 11,500 / 2,300 = $5

overhead 5 hours x $5 = $25 overhead

Material $120 + Labor $95 + $25 overhead + $192 profit = $407