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Chris S. Wallace ( Smalls) recently bid a job , 5000 yards of concrete @ $ 125 per yard =$625,000 PLUS direct labor 8000 hours
Chris S. Wallace ( Smalls) recently bid a job , 5000 yards of concrete @ \$ 125 per yard =$625,000 PLUS direct labor 8000 hours @ \$ 65 per hour =$520,000 PLUS a mark up for overhead $50,000 PLUS profit of $100,000. So , the total bid was $1,295,000 (including overhead and profit). The job took six months and was managed by Shawna Combs. The job is now over and things did not go as planned. The job ended up COSTING $1,410,000. 5500 yards of concrete was used costing @ \$120 per yard. It took 10,000 hours to complete the job at labor cost of $700,000. In summary, material cost was $660,000, labor cost was $700,000 and overhead was $50,000 ( on budget) =$1,410.000. So, not only did they NOT make their $100,000 profit they actually lost money on the job since costs exceeded their bid. JZ is not happy and looking for answers from the CFO. That's you !! Start by calculating material price variance, material quantity variance, labor rate variance, labor efficiency variance. ( identify as favorable or unfavorable). What's your next step ? You have been meeting with Combs on a monthly basis and she made no indication of the job being in trouble . Smalls is " notorious" for blaming poor management whenever jobs go bad. When you mention tighter management controls to Combs she huffs and "puffs". Looking at the variances you calculated, what might be some of the reasons for unfavorable variances and blown budgets? How do you address these concerns
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