Job cost and bid price at a consulting firm (Learning Objective 6)

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 labor costs.

At the beginning of 2009, managing partner Tony Black prepared the following plan, or budget, for 2009:

Land Resources is inviting several consulting firms to bid for work. Black estimates that this job will require about 220 direct labor hours.
Requirements 1. Compute Black Consulting’s

(a) hourly direct labor 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 he bid for the Land Resources job?

Transcribed Image Text:

Direct labor hours (professionals). Direct labor costs (professionals)... Office rent........... Support staff salaries............. Utilities......... 17,000 hours $2,669,000 350,000 1,194,300 324,000