Question: Robin Thomas the owner of Thomas Custom Cabinets is preparing

Robin Thomas, the owner of Thomas’ Custom Cabinets, is preparing a bid on a kitchen remodeling job for Matt and Heather. Robin expects that the job will require $1,700 of direct materials, $2,800 of direct labor, and $2,200 of overhead costs. Selling and administrative expenses for the job are expected to be $600. On average, last year Robin earned about $3,000 profit on a job this size and would like to increase the profit by 5 percent on new contracts. Robin normally applies a markup on cost of goods sold to arrive at an initial bid price and then adjusts the price if necessary in order to meet competitors’ prices. Matt and Heather already have one bid from a national home improvement chain to do the job for $8,000.

A. Calculate the markup percentage on the new job.
B. What is Robin’s initial bid?
C. In light of the competitor’s price of $8,000, what would you recommend as a bid price for Robin?

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  • CreatedMarch 11, 2015
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