Before you begin this assignment, review the Tying It All Together feature in the chapter Granite Construction Incorporated is a major construction firm whose projects include roads, highways, bridges, dams, tunnels, mass transit facilities, and airports. Suppose Granite Construction wants to bid on a project to construct a bridge in Nevada Estimators have projected the expected direct materials costs to be $55 million and the direct labor costs (including design and construction) to be $30 million. The company uses a predetermined overhead allocation rate of 50% of direct labor costs and a markup of 20% of total costs. Requirements What items would most likely be included in direct materials? Calculate the estimated direct costs, the indirect costs, and the total costs for the project. What amount should Granite Construction bid for the project? Why does Granite Construction include both direct and indirect costs when calculating the markup?

Before you begin this assignment, review the Tying It All Together feature in the chapter Granite Construction Incorporated is a major construction firm whose projects include roads, highways, bridges, dams, tunnels, mass transit facilities, and airports. Suppose Granite Construction wants to bid on a project to construct a bridge in Nevada Estimators have projected the expected direct materials costs to be $55 million and the direct labor costs (including design and construction) to be $30 million. The company uses a predetermined overhead allocation rate of 50% of direct labor costs and a markup of 20% of total costs. Requirements What items would most likely be included in direct materials? Calculate the estimated direct costs, the indirect costs, and the total costs for the project. What amount should Granite Construction bid for the project? Why does Granite Construction include both direct and indirect costs when calculating the markup?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

Before you begin this assignment, review the Tying It All Together feature in the chapter

Granite Construction Incorporated is a major construction firm whose projects include roads, highways, bridges, dams, tunnels, mass transit facilities, and airports. Suppose Granite Construction wants to bid on a project to construct a bridge in Nevada Estimators have projected the expected direct materials costs to be $55 million and the direct labor costs (including design and construction) to be $30 million. The company uses a predetermined overhead allocation rate of 50% of direct labor costs and a markup of 20% of total costs.

Requirements

What items would most likely be included in direct materials?
Calculate the estimated direct costs, the indirect costs, and the total costs for the project.
What amount should Granite Construction bid for the project?
Why does Granite Construction include both direct and indirect costs when calculating the markup?

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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