Problem 15-45 Time and Material Pricing (LO 15-9)

Southern Tier Heating, Inc., installs heating systems in new homes built in the southern tier counties of New York state. Jobs are priced using the time and materials method. The president of Southern Tier Heating, B. T. Ewing, is pricing a job involving the heating systems for six houses to be built by a local developer. He has made the following estimates.

Material cost	$	84,000
Labor hours		600

The following predictions pertain to the companys operations for the next year.

Labor rate, including fringe benefits	$	18.00	per hour
Annual labor hours		15,000	hours
Annual overhead costs:
Material handling and storage	$	33,500
Other overhead costs	$	150,000
Annual cost of materials used	$	335,000

Required: Southern Tier Heating adds a markup of $8.00 per hour on its time charges, but there is no markup on material costs. 1. Calculate the company's time charges and the material charges percentage. (Round "Time charges" answer to 2 decimal places.) 2. Compute the price for the job. (Do not round intermediate calculations.) 3. What would be the price of the job if Southern Tier Heating also added a markup of 20 percent on all material charges (including material handling and storage costs)? (Do not round intermediate calculations.)

1.	Time charges	$36.00	per labor hour
	Material charges	10	%
2.	Price of job	$114,000
3.	Price of job	?