What is the cost and price of the following job? A start-up company wants to price this job to cover costs and have a reasonable profit.

Data:

• The company purchased 1,000 parts at $25 each
• Job #1 requisitioned 20 parts for conversion in a job
• 10 hours of labour are to be used in the job
• The average wage per hour is $50
• The company expects to have $25,000 of factory overhead and total labour hours of 500 in the year.
• Corporate overhead including engineering applied to the job will be $500
• The profit margin is 20%
• The price to the customer is total cost plus 20% of that cost
• It is a fixed price contract
• The production process has just started and will need constant process improvements

Question:

1. What is the cost of the job?

2. What is the price of the job?

3. What is one risk to monitor?