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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
Architect 168 $300
Staff 336 75
Clerical 725 20

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $55,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $294,000 and $368,000 for the job.

(1) What is Frey’s estimated cost of the architectural job?
(2) If Frey bids a price of $294,000, will it earn its target profit of $55,000?
(3) What is Frey’s Estimated selling price?

Respuesta :

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Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Labor Estimated Hours Hourly Rate

Architect 168 $300

Staff 336 75

Clerical 725 20

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $55,000 profit on the architectural job.

A) Total cost= architect + staff + clerical + allocated overhead

Total labor cost= 168*300 + 336*75 + 725*20= $90,100

Total cost= 90,100 + (90,100*1.75)= $247,775

B) Bid= 294,000

Profit= Bid - total cost

Profit= 294,000 - 247,775= 46,225

It will not reach the desired profit.

C) Estimated selling price= total cost + desired profit

Estimated selling price= 247,775 + 55,000= $302,775