Markup on Cost, Cost-Based Pricing Arthur Quillen Construction Company is a general contractor that specializes in...
Markup on Cost, Cost-Based Pricing
Arthur Quillen Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Quillen’s direct costs and subcontractor costs as well as an amount referred to as “overhead and profit.” Quillen’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 | $8,481,780 | ||
| Direct materials | $2,202,000 | ||
| Direct labor | 1,723,000 | ||
| Subcontractors | 3,581,000 | 7,506,000 | |
| Overhead and profit | $975,780 |
Required:
1. Given the preceding information, what is the
markup percentage on total direct costs?
%
2. Suppose Quillen is asked to bid on a job
with estimated direct costs of $572,000. What is the bid?
$
Homework Answers
| 1 | ||
| Overhead and profit | 975780 | |
| Divide by Total direct costs | 7506000 | |
| Markup percentage | 13% | |
| 2 | ||
| Estimated direct costs | 572000 | |
| Add: Markup | 74360 | =572000*13% |
| Bid | 646360 |
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