Question

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 $132,804 _______
Parts manager's salary and benefits _______ $34,000
Office employee's salary and benefits 23,380 11,000
Other overhead 15,401 48,675
Total budgeted costs $171,585 $93,675

The company has budgeted for 5,580 hours of technician time during the coming year. It desires a $38.86 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 $750,000.

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 bil.

Answer 1

The total estimated bil is $82,564.8

Step-by-step explanation:

a. In order to calculate the rate charged per hour of labor we would have to use the following formula:

Labor rate per hour=Total budgeted time charges +Profit Margin

Budgeted hours

=$171,585 + $38.86

5,580

=$69.61

The rate charged per hour of labor is $69.61

b. In order to calculate the material loading percentage we would have to use the following formula:

material loading=Total budgeted material loadingcharges+Profitpercentage

percentage Total invoice of parts and materiales on parts

material loading percentage=$93,675 + 80%

$750,000

=92.49%

The material loading percentage is 92.49%

c. In order to calculate the total estimated bill we would have to use the following formula:

total estimated bill=(labor rate per hour×hours required)+(material loading percentage×parts required)+material

=($69.61×80)+(92.49%×$40,000)+$40,000

=$5,568.8+$36,996+$40,000

=$82,564.8

The total estimated bil is $82,564.8