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. 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 25%), producing a bid price of $590,000. Assume that 60% of construction overhead is fixed.

Land $ 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 $472,000Regular Special Order Land Construction Materials Suncontractor Labor Costs Construction OH (20% of direct costs) Allocated Corporate OH Margin Price