Nordholm Construction Company Builds Houses

Essay

Nordholm Construction Company builds houses. Each job requires a bid. Nordholm's bidding policy is to estimate the costs of materials, direct labour, and subcontractor's costs. These are totaled and a mark up is applied to cover overhead and profit. In the coming year, Nordholm believes it will be the successful bidder on ten jobs with the following total revenues and costs: The residual will cover overhead and profits.
Required:
a.
What is the mark up percentage on total direct costs?
b.
Suppose Nordholm is asked to bid on a job with estimated direct costs of £55,000. What is the bid? If the customer complains that the profit seems pretty high, how might Nordholm counter that?