Question
You received a proposal for a company you frequently do business with. On this proposal they are indicating a labor cost of $750,000 and general
You received a proposal for a company you frequently do business with. On this proposal they are indicating a labor cost of $750,000 and general administrative (G&A) cost of $250,000. You have the following knowledge about them:
--- The G&A rate on the last four projects they proposed 12-18 months ago was 23%
--- There have been no changes in their business operations (no new offices, expanded facilities and they have only increased the number of personnel in their direct labor workforce)
--- The contractor recently won an additional contract which doubled the amount of work they have
In conducting cost realism analysis you would:
Provide the contractor a rate they could not exceed for overhead
Anticipate a higher overhead rate due to the additional work they have obtained
Question the direct costs as being too high
Conduct a most probably cost establishing the high range for overhead at $172,500
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started