Question

Assume Samsung is designing a new smartphone. Each unit of this new phone is expected to require $285 of direct materials, $10 of direct labor, $30 of variable overhead, $5 of variable selling and administrative costs, and $20 of fixed selling and administrative costs.

1. For both Samsung and Apple, compute time charge per hour of direct labor (in $).
2. For both Samsung and Apple, compute materials markup per dollar of direct material cost (in %).
3. For both Samsung and Apple, use time and materials pricing to compute the price quote for a local college. Both companies estimate the obligation to this college will require 1,000 direct labor hours and $35,000 of direct materials cost.

Answer 1

1. For both Samsung and Apple, the time charge per hour of direct labor is $10. 2. For Samsung, the materials markup per dollar of direct material cost is 12.28%, while for Apple it is 9.82%. 3. The price quote for a local college using time and materials pricing is $14,289 for Samsung and $13,873 for Apple.

Step-by-step explanation:

1. To compute the time charge per hour of direct labor for both Samsung and Apple, we need to divide the direct labor cost by the number of direct labor hours. Assuming Samsung and Apple have the same direct labor cost per unit, we can divide the direct labor cost by the total direct labor hours. Let's calculate:

Samsung: Time charge per hour of direct labor = $10 / 1 hour

= $10/hour

Apple: Time charge per hour of direct labor = $10 / 1 hour

= $10/hour

2. To compute the materials markup per dollar of direct material cost for both Samsung and Apple, we need to divide the total variable costs by the total direct material cost. Let's calculate:

Samsung: Materials markup per dollar of direct material cost = ($30 + $5) / $285

= 0.1228 or 12.28%

Apple: Materials markup per dollar of direct material cost = ($20 + $5) / $285

= 0.0982 or 9.82%

3. To compute the price quote for a local college using time and materials pricing, we need to multiply the time charge per hour of direct labor by the number of direct labor hours and add it to the direct material cost multiplied by the materials markup per dollar. Let's calculate:

Samsung: Price quote = (1,000 hours * $10/hour) + ($35,000 * 0.1228)

= $10,000 + $4,289

= $14,289

Apple: Price quote = (1,000 hours * $10/hour) + ($35,000 * 0.0982)

= $10,000 + $3,873

= $13,873