Tony Nunzio, a building contractor, builds parking garages. His company is capable of building multiple parking garages
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Question:
Tony Nunzio, a building contractor, builds parking garages.
His company is capable of building multiple parking garages at once. Nunzio has budgeted for an expected number of parking garages in 2015 as follows:
Direct Materials | $2,000,000 |
Direct Labor | 3,000,000 |
Job construction overhead - Variable Costs | 2,000,000 |
Job construction overhead - Fixed Costs | 1,000,000 |
Cost of jobs | $8,000,000 |
Selling and Administrative Costs - Variable | 2,500,000 |
Selling and Administrative Costs - Fixed | 1,500,000 |
Total Costs | $12,000,000 |
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Nunzio wants an operating income of $2,000,000 for 2015.
Required:
1. Compute the average target markup percentage for setting prices as a percentage of the following:
a) Direct Materials plus Direct Labor
b) The full "Cost of Jobs"
c) The Variable "Cost of Jobs"
d) The full "Cost of Jobs" plus Selling and Administrative Costs
2. Why are these calculations important?
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