Chapter 8, Problem 8.9E

Rey Custom Electronics (RCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time- and-material pricing. The following budgeted cost data are available.

	Time Charges	Material Loading Charges
Technicians’ wages and benefits	$ 150,000	—
Parts manager’s salary and benefits	—	$34,000
Office employee’s salary and benefits	30,000	15,000
Other overhead	15,000	42,000
Total budgeted costs	$195,000	$91,000

The company has budgeted for 6,250 hours of technician time during the coming year. It desires a $38 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2017 will be $700,000.

Instructions

(a) Compute the rate charged per hour of labor.

(b) Compute the material loading percentage.

(c) RCE has just received a request for a bid from Buil Builders on a $1,200,000 new home. The company estimates that it would require 80 hours of labor and $40,000 of parts. Compute the total estimated bill.