Black Consulting, a real estate consulting firm, specializes in advising companies on potential new plant sites. Black Consulting uses a job cost system with a predetermined indirect cost allocation rate computed as a percentage of expected direct labour costs.
At the beginning of the year, managing partner Jada Black prepared the following plan,or budget, for the year:
Direct labour hours (professionals) ................................................. 17,000 hours
Direct labour costs (professionals)................................................... $2,669,000
Office rent....................................................................................... 350,000
Support staff salaries....................................................................... 1,194,300
Utilities............................................................................................ 324,000
Land Resources is inviting several consulting firms to bid for work. Black estimates that this job will require about 220 direct labour hours.
Requirements
1. Compute Black Consulting’s (a) hourly direct labour cost rate and (b) indirect cost allocation rate.
2. Compute the predicted cost of the Land Resources job.
3. If Black wants to earn a profit that equals 50% of the job’s cost, how much should she bid for the Land Resources job?
Land Resources is inviting several consulting firms to bid for work. Black estimates that this job will require about 220 direct labour hours.