Griffy, Rodriguez, and Martinez, a CPA firm, is preparing to bid for a consulting job. Although Alicia Martinez will use her judgment about the market in finalizing the bid, she has asked you to prepare a cost analysis to help in the bidding. You have estimated the costs for the consulting job to be as follows:
Materials and supplies, at cost ............. $ 30,000
Hourly pay for consultants, 2,000 hours at $35 per hour ... 70,000
Fringe benefits for consultants, 2,000 hours at $12 per hour . 24,000
Total variable costs ................. 124,000
Fixed costs allocated to the job
Based on labor, 2,000 hours at $10 per hour ....... 20,000
Based on materials and supplies, 80% of 30,000 ...... 24,000
Total cost ..................... $168,000

Of the $44,000 allocated fixed costs, $35,000 will be incurred even if the job is not undertaken. Alicia normally bids jobs at the sum of (1) 150% of the estimated materials and supplies cost and (2) $75 per estimated labor hour.
1. Prepare a bid using the normal formula.
2. Prepare a minimum bid equal to the additional costs expected to be incurred to complete the job.
3. Prepare a bid that will cover full costs plus a markup for profit equal to 20% of full cost.

  • CreatedNovember 19, 2014
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