George Jettson builds custom homes in Cincinnati. Jettson was approached not too long ago by a client about a potential project, and he submitted a bid of $590,000, derived as follows: Jettson adds a 25% profit margin to all jobs, computed on the basis of total cost. In this client's case the profit margin amounted to $118,000 ($472,000 x 25%), producing a bid price of $590,000. Assume that 60% of construction overhead is fixed. Required: A. Suppose that business is presently very slow, and the client countered with an offer on this home of $455,000. Should Jettson accept the client's offer? Why?

Land 3 90,000 Construction materials 120,000 Subcontractor labor costs 150,000 $360,000 Construction overhead: 20% of direct costs 72,000 Allocated corporate overhead 40,000 Total cost m