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 158 $ 300 Staff 316 75 Clerical 600 20 Frey applies overhead to jobs at 175% of direct labor cost. Frey wants to earn at least $70,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $289,000 and $358,000 for the job. 1. What is Frey’s estimated cost of the architectural job? 2. If Frey bids a price of $289,000, what is its expected profit? Will it earn its target profit of $70,000? 3. What bid price would earn the desired $70,000 target profit?
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 158 $ 300 Staff 316 75 Clerical 600 20 Frey applies overhead to jobs at 175% of direct labor cost. Frey wants to earn at least $70,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $289,000 and $358,000 for the job. 1. What is Frey’s estimated cost of the architectural job? 2. If Frey bids a price of $289,000, what is its expected profit? Will it earn its target profit of $70,000? 3. What bid price would earn the desired $70,000 target profit?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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 | 158 | $ 300 |
| Staff | 316 | 75 |
| Clerical | 600 | 20 |
Frey applies
1. What is Frey’s estimated cost of the architectural job?
2. If Frey bids a price of $289,000, what is its expected profit? Will it earn its target profit of $70,000?
3. What bid price would earn the desired $70,000 target profit?
Transcribed Image Text:If Frey bids a price of $289,000, what is its expected profit? Will it earn its target profit of $70,000?
If Frey bids a price of $289,000, what is its expected profit?
If Frey bids a price of $289,000, will it earn its target profit of $70,000?
Transcribed Image Text:What is Frey's estimated cost of the architectural job?
Direct labor
Estimated hours
Total estimated labor cost
Estimated Cost
Hourly rate
Overhead
Estimated Applied Overhead
Total estimated cost
OH base
Labor cost
OH rate
Total Cost
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