Markup on Cost, Cost-Based Pricing

Whang Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Whang's direct costs and subcontractor costs as well as an amount referred to as overhead and profit. Whang's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:

Revenue			$9,282,640
Direct materials	$2,253,000
Direct labor	1,858,000
Subcontractors	3,375,000		7,486,000
Overhead and profit			$1,796,640

Required:

1. Given the preceding information, what is the markup percentage on total direct costs? fill in the blank 1 %

2. Suppose Whang is asked to bid on a job with estimated direct costs of $588,000. What is the bid? $fill in the blank 2

3. Briefly explain how Whang Constructions accountant might utilize data analytics to help decide on the markup percentage to use in setting prices. (see Exhibits 2.5 and 2.6, for a review of data analytics types.)

However, one logical use of data analytics would be for the accountant to utilize

descriptivediagnosticpredictiveprescriptive

analytics to assess the markup percentage applied by other similar companies in the industry.