Chapter 19, Problem 18E

Exercise 19-18 Job order costing for services A1
Hansel Corporation has requested bids from several architects to design its new corporate headquarters. Frey Architects is one of the firms bidding on the job. Frey estimates that the job will require the following direct labor.

	A	B	C
D	Labor	Estimated Hours	Hourly Rate
1	Architects	150	$300
2	Staff	300	75
3	Clerical	500	20

Frey applies overhead to jobs at 175% of direct labor cost. Frey would like to earn at least $80,000 profit on the architectural job. Based on past experience and market research, it estimates that the competition will bid between $285,000 and $350,000 for the job.

1. What is Frey's estimated cost of the architectural job?
Check (1) $213,125

2. Prefer bids a price of $285,000, will it earn its target profit of $80,000?
Analysis Component

3. What bid would you suggest that Frey submit?