Rand Company manufactures modular homes. The company has two main products that it sells commercially: a 1,000-square-foot, one-bedroom model and a 1,500-square-foot, two-bedroom model. The company recently began providing emergency housing (huts) to the Federal Emergency Management Agency (FEMA). The emergency housing is similar to the 1,000-square-foot model.

FEMA has requested Rand to create a bid for 150 emergency huts to be sent for wildfire victims in the West. Your manager has asked that you prepare this bid. In preparing the bid, you find a recent invoice to FEMA for 200 huts provided during the most recent hurricane season in the South. You also have a standard cost sheet for the 1,000-square-foot model sold commercially. Both are provided as follows:

Required
1. Calculate the total bid if you base your calculations on the standard cost sheet assuming a cost plus 20% government contract.
2. Calculate the total bid if you base your calculations on the September 15, 2014, invoice assuming a cost plus 20% government contract.
3. What are the main discrepancies between the bids you calculated in requirements 1 and 2?
4. What bid should you present to your manager? What principles from the IMA “Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management,” as described in Chapter 1, should guide your decision? As the manager, what would youdo?

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Standard cost sheet: 1,000-sq.-ft., one-bedroom model Direct materials Direct manufacturing labor Manufacturing overhead Total cost Retail markup on total cost Retail price S9,500 704 2,464 $12,668 -25% $15,835 32 hours 3.50 per direct labor dollar INVOICE DATE: September 15, 2014 BILL TO: FEMA FOR: 200 Emergency Huts SHIPTO: Sarasota, Florida Direct materials Direct manufacturing labor Manufacturing overhead Total cost Government contract markup on total cost Total due $2,090,000 164 400 575,400 2 829,800 3 395,760