Question

E9-2 Computing profit or loss on a bid Sebastian and Whitley, plumbers, successfully bid $30,000 for the plumbing work on a new luxury home. Total direct labor cost on the job was $9,500, other direct costs were $2,500, and overhead is charged to jobs at 150% of direct labor cost.

Answer 1

1.

Total direct costs = $2,500

Direct labor cost = $9,500

Overhead = 150$ of direct labor cost

= 9,500 x 150%

= $14,250

Total cost = Other direct costs + Direct labor cost + Overhead

= 2,500+9,500+14,250

= $26,250

(a)

Profit = Bid price - Total costs

= 30,000-26,250

= $3,750

(b)

Profit percentage = Profit/Bid price

= 3,750/30,000

= 12.5%

2.

Direct labor cost + overheads

= 9,500+14,250

= $23,750

Direct labor cost plus overhead as a percentage of total cost = 23,750/26,250

= 90.4%

Kindly comment if you need further assistance.

Thanks‼!