Question

Zander Consulting, a real estate consulting firm, specializes in advising companies on ­potential new plant sites. The firm uses a job cost system with a predetermined indirect cost allocation rate computed as a percentage of expected direct labor costs. At the beginning of the year, managing partner Chloe Zander prepared the following plan, or budget, for the year:
Direct labor hours (professionals)..................................................... 14,000 hours
Direct labor costs (professionals)..................................................... $ 2,150,000
Office rent........................................................................................ $ 220,000
Support staff salaries........................................................................ $ 910,000
Utilities............................................................................................. $ 290,000

Jamba Resources is inviting several consulting firms to bid for work. Zander estimates that this job will require about 180 direct labor hours.

Requirements
1. Compute Zander Consulting’s (a) hourly direct labor cost rate and (b) indirect cost allocation rate.
2. Compute the predicted cost of the Jamba Resources job.
3. If Zander Consulting wants to earn a profit that equals 40% of the job’s cost, how much should the company bid for the Jamba Resources job?



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  • CreatedAugust 27, 2014
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