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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 30
Markup on Cost, Cost-Based Pricing
Arthur Quillen Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Quillen's direct costs and subcontractor costs as well as an amount referred to as "overhead and profit." Quillen's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?
2. Suppose Quillen is asked to bid on a job with estimated direct costs of $570,000. What is the bid? If the customer complains that the profit seems pretty high, how might Quillen counter that accusation?
Arthur Quillen Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Quillen's direct costs and subcontractor costs as well as an amount referred to as "overhead and profit." Quillen's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?
2. Suppose Quillen is asked to bid on a job with estimated direct costs of $570,000. What is the bid? If the customer complains that the profit seems pretty high, how might Quillen counter that accusation?
Explanation
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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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