Djerrie Beelder, a Russian emigre, is a jobbing builder who has carved out something of a niche in his field. He builds small housing estates, up to fifteen or twenty houses at a time. An inspection of Beelder’s records for a recent year reveals:

The job construction overhead includes £600,000 of fixed costs, such as the salaries of foremen and depreciation on plant and equipment. The selling and administration costs include £300,000 of variable costs, such as sales commissions and bonuses that depend on overall profitability. The selling price of each job is to be £9,000,000.
Required Calculate the average target profit percentage for setting prices as a percentage of:

(a) prime costs;

(b) full cost;

(c) variable cost of jobs;

(d) full cost of jobs plus selling and administration costs; and

(e) variable cost of jobs plus variable selling and administration costs.

Transcribed Image Text:

Direct materials Direct labour 3,000,000 1,500,000 Job construction overhead 1,500,000 Cost of jobs 6,000,000 Selling and administration overheads 1,500,000 Total costs 7,500,000