Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here.

A. The town’s social services has asked Ken if he could reduce his bid to $4000. Should Ken accept the counter offer?

B. How much would his income be reduced?

C. If the town’s social services guaranteed him another job next month at his normal price, could he accept this job at $4000?

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Ken's Bid Detail Dollars Direct material Direct labor Variable overhead Fixed overhead Profit $2200 1600 200 600 400 $5000