Walker Construction acts as the general contractor on building projects ranging from

\($500,000\) to \($5\) million. Each job requires a bid that includes Walker’s direct costs and subcontractor costs as well as an amount referred to as “overhead and profit.” Walker’s bidding policy is to estimate the direct materials cost, direct labor cost, 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 Walker is asked to bid on a job with estimated direct costs of $980,000.
What is the bid? If the customer complains that the profit seems pretty high, how might Walker counter that accusation?

Transcribed Image Text:

Revenue Direct materials $23,580,000 $6,500,000 Direct labor 4,316,000 Subcontractors 8,834,000 19,650,000 Overhead and profit $ 3,930,000