Revenue $8,740,000 Direct materials $2,250,000 Direct labor 1,900,000 3,450,000 Subcontractors 7,600,000 Overhead and profit Ș1,140,000
Markup on Cost, Cost-Based Pricing
Arthur Quillen Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Quillen’s direct costs and subcontractor costs as well as an amount referred to as “
markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?
2. Suppose Quillen is asked to bid on a job with estimated direct costs of $570,000. What is the
bid? If the customer complains that the profit seems pretty high, how might Quillen counter
that accusation?
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