Southern Tier Heating, Inc. installs heating systems in new homes built in the southern tier counties of New York state. Jobs are priced using the time and materials method. The president of Southern Tier Heating, B. T. Ewing, is pricing a job involving the heating systems for six houses to be built by a local developer. He has made the following estimates.
Material cost | $60,000 |
Labor hours | 400 |
The following predictions pertain to the company's operations for the next year.
Labor rate, including fringe benefits | $16,00 per hour |
Annual labor hours | 12,000 hours |
Annual overhead costs |
|
Material handling and storage | $25,000 |
Other overhead costs | $108,000 |
Annual cost of materials used | $250,000 |
Required: Southern Tier Heating adds a markup of $4.00 per hour on its time charges, but there is no markup on material costs.
1. Develop formulas for the company’s (a) time charges and (b)material charges.
2. Compute the price for the job described above.
3. What would be the price of the job if Southern Tier Heating also added a markup of 10 percent on all material charges (including material handling and storage costs)?
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