Question

HH Auto Repair reports the following information for the coming year.

Labor rate, including fringe benefits $ 45 per labor hour
Annual labor hours 10,900 hours
Annual materials (parts) purchases $2,090,000
Annual overhead costs:
Materials purchasing, handling, and storage $ 355,300
Other overhead (depreciation, insurance, taxes, rent) 185,300
Target profit margin (on both labor and materials) $ 33 %
1. Compute the price (rate) per hour of direct labor. (Round your answer to 2 decimal places.)
2. Compute the materials markup (in %).
3. What price should the company quote for a job requiring five labor hours and $670 in parts? (Round your answer to 2 decimal places.)

Answer 1

Answer: See explanation

Step-by-step explanation:

1. Compute the price (rate) per hour of direct labor.

This will be:

= [45 + (185,300 / 10,900)]× 1.33

= (45 + 17) × 1.33

= 62 × 1.33

= $82.46

2. Compute the materials markup.

This will be:

= =(355,300 / 2090,000) + 33%

= 0.17 + 33%

= 17% + 33%

= 50%

3. What price should the company quote for a job requiring five labor hours and $670 in parts?

This will be:

= (670 × 1.5) + (82.46 × 5)

= 1005 + 412.3

= $1417.30