ansel Company has requested bids from several architects to design its new corporate headquarters. Frey Architects is bidding on the job. Frey estimates that the job will require the following direct labor. Direct Labor Estimated Hours Hourly Rate Architects 184 $ 300 Staff 368 75 Clerical 925 20 Frey applies overhead to jobs at 175% of direct labor cost. Frey wants to earn at least $30,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $302,000 and $384,000 for the job. 1. What is Frey’s estimated cost of the architectural job? 2. If Frey bids a price of $302,000, what is its expected profit? Will it earn its target profit of $30,000? 3. What bid price would earn the desired $30,000 target profit?
ansel Company has requested bids from several architects to design its new corporate headquarters. Frey Architects is bidding on the job. Frey estimates that the job will require the following direct labor. Direct Labor Estimated Hours Hourly Rate Architects 184 $ 300 Staff 368 75 Clerical 925 20 Frey applies overhead to jobs at 175% of direct labor cost. Frey wants to earn at least $30,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $302,000 and $384,000 for the job. 1. What is Frey’s estimated cost of the architectural job? 2. If Frey bids a price of $302,000, what is its expected profit? Will it earn its target profit of $30,000? 3. What bid price would earn the desired $30,000 target profit?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hansel Company has requested bids from several architects to design its new corporate headquarters. Frey Architects is bidding on the job. Frey estimates that the job will require the following direct labor.
| Direct Labor | Estimated Hours | Hourly Rate |
|---|---|---|
| Architects | 184 | $ 300 |
| Staff | 368 | 75 |
| Clerical | 925 | 20 |
Frey applies
1. What is Frey’s estimated cost of the architectural job?
2. If Frey bids a price of $302,000, what is its expected profit? Will it earn its target profit of $30,000?
3. What bid price would earn the desired $30,000 target profit?
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