Suburban Heating, Inc., installs heating systems in new homes built in suburban Philadelphia. Jobs are priced using the time and materials method. The following predictions pertain to the company’s operations for the next year.

Labor rate, including fringe benefits.............................. $20.00 per hour

Annual labor hours......................................................... 12,000 hours

Annual overhead costs:

Material handling and storage....................................... $31,250

Other overhead costs..................................................... $135,000

Annual cost of materials used........................................ $312,500

The president of Suburban 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 ............................................................$75,000

Labor hours............................................................... 400

Required:

Suburban Heating adds a markup of $5.00 per hour on its time charges, but there is no markup on material costs.

1. Develop formulas for the company’s

(a) Time charges

(b) Material charges.

2. Compute the price for the job described above.

3. What would be the price of the job if Suburban Heating also added a markup of 10 percent on all material charges (including material handling and storage costs)?