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: Revenue $9,226,800 Direct materials $2,212,000 Direct labor 1,834,000 Subcontractors 3,643,000 7,689,000 Overhead and profit $1,537,800 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 $553,000. 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 descriptive analytics to assess the markup percentage applied by other similar companies in the indu
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:
| Revenue | $9,226,800 | |
| Direct materials | $2,212,000 | |
| Direct labor | 1,834,000 | |
| Subcontractors | 3,643,000 | 7,689,000 |
| Overhead and profit | $1,537,800 |
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 $553,000. 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 descriptive analytics to assess the markup percentage applied by other similar companies in the industry.
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