Question
Peter Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with
Peter Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined overhead allocation rate, computed as a percentage of direct labor costs. At the beginning of 2016, managing partner Andrew Peters Prepared the following budget for the year:
Chance Manufacturing, Inc. is inviting several consultants to bid for work. Andrew Peters wants to submit a bid. He estimates that this job will require about 250 direct labor hours.
Direct labor hours (professionals) | 25,000 | hours |
Direct labor costs (professionals) | $2,500,000 | |
Office rent | 320,000 | |
Support staff salaries | 1,260,000 | |
Utilities | 420,000 |
|
Requirements:
1. | Compute Peters Realtors (a) hourly direct labor cost rate and (b) predetermined overhead allocation rate. |
2. | Compute the predicted cost of the Chance Manufacturing job. |
3. | If Peters wants to earn a profit that equals 50% of the jobs cost, how much should he bit for the Chance Manufacturing job? |
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