hang Construction Company is a general contractor that specia verhead and profit." Whang's bidding policy is to estimate the ar, the company believes it will be the successful bidder on 10 $9,712,920 evenue irect materials rect labor ubcontractors Overhead and profit equired: Given the preceding information, what is the markup percenta $2,222,000 2,011,000 3,600,000 7,833,000 $1,879,920
hang Construction Company is a general contractor that specia verhead and profit." Whang's bidding policy is to estimate the ar, the company believes it will be the successful bidder on 10 $9,712,920 evenue irect materials rect labor ubcontractors Overhead and profit equired: Given the preceding information, what is the markup percenta $2,222,000 2,011,000 3,600,000 7,833,000 $1,879,920
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Subject:- accounting
Transcribed Image Text:Markup on Cost, Cost-Based Pricing
Whang Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Whang's direct costs and subcontractor costs as well as an amount referred to as
"overhead and profit." Whang's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming
year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
$9,712,920
Revenue
Direct materials
Direct labor
Subcontractors
Overhead and profit
$2,222,000
2,011,000
3,600,000
%
7,833,000
$1,879,920
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?
2. Suppose Whang is asked to bid on a job with estimated direct costs of $579,000. What is the bid?
3. Briefly explain how Whang Construction's accountant might utilize data analytics to help decide on the markup percentage to use in setting prices. (see Exhibits 2.5 and 2.6, for a review of data analytics types.)
However, one logical use of data analytics would be for the accountant to utilize
analytics to assess the markup percentage applied by other similar companies in the industry.
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