Question

Hansel Corporation has requested bids from several architects to design its new corporate headquarters. Frey Architects is one of the firms bidding on the job. Frey estimates that the job will require the following direct labor.

Labor	Estimated Hours				Hourly Rate
Architects		176				$	300
Staff		352					75
Clerical		825					20

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $40,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $298,000 and $376,000 for the job.

1. What is Frey’s estimated cost of the architectural job?
2. If Frey bids a price of $298,000, will it earn its target profit of $40,000?
3. What is Frey’s Estimated selling price?

Answer 1

B12 X for 2 F G H Labor Hourly Rate Cost Architects Staff Clerical Estimated Hours 176 352 825 Total Labor Cost $ 300 $ 75 $20 $ 52,800 $ 26,400 $ 16,500 $ 95,700 Total Labor Cost Applied overheads Frey's estimated cost of the architectural job $ 95,700 $ 167,475 $ 263,175 .. Frey's bid price $ 298,000 Frey's estimated cost of the architectural job | $ 263,175 Profit earned on the job $ 34,825 Frey will NOT earn its desired profit of $40,000 Frey's estimated cost of the architectural job Frey's target profit Frey's Estimated selling price | $ 263,175 $ 40,000 $ 303,175

for formulas and calculations, refer to the image below -

B12 x 2 1 C fc D A B E G H Labor Estil Estimated Hours Hourly Rate Cost Architects Staff Clerical 300 75 176 352 825 Total Labor Cost =E3*F3 =E4F4 =E5F5 =SUM(G3:45) 20 Total Labor Cost Applied overheads Frey's estimated cost of the architectural job =G6 =G8*175% =G8+G9 Frey's bid price 298000 Frey's estimated cost of the architectural job =G10 Profit earned on the job =G12-G13 Frey will NOT earn its desired profit of $40,000 Frey's estimated cost of the architectural job Frey's target profit Frey's Estimated selling price =G10 40000 =G17+G18

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