1) The Smart Repair Company has been in business for 10 years and is located in Sault Ste. Marie, Ontario. The Company repairs farm equipment. The following budgeted cost data is available for 2021:

Time Material

Charges Charges

Technicians' wages and benefits $600,000

Parts manager's salary and benefits $ 72,000

Office manager's salary and benefits 112,000 18,000

Other overhead 48,000 110,000

The Smart Repair Company has budgeted for 10,000 hours of technician time during the coming year. It desires a $64 profit margin per hour of labour and a 50% profit margin on parts. The company estimates the total invoice cost of parts and materials in 2021 will be $500,000.

Instructions

a) Calculate the rate charged per hour of labour.

b) Calculate the material loading charge.

c) Smart Repair has received a request from Food Corporation for an estimate to repair a tractor. The company estimates that it would take 20 hours of labour and $8,000 of parts. Calculate the total estimated bill.

d) Explain why it is important to have a material loading charge.