Sutherland Estimating Company employs three professional estimators, each having a different specialty. John Spencer specializes in structural estimating; Steve Ray, electrical estimating; and Dave Eugene, mechanical estimating. The firm expects to incur the following operating costs upcoming year.

Office salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000

Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Utilities and telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

Taxes and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Total estimated costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $115,000

The salaries and billable hours of the three estimators are expected to be as follows:

Required:
1. Compute the overhead cost rate that should be used for each of the estimators (based on the expected hours to be billed, with overhead cost rates varying in proportion to each estimator's compensation) to ensure that the total expected operating costs for the year will be recovered from clients.
2. Using the overhead cost rates determined in part (1), determine the costs associated with the firm's work for Water-ship Company with the following estimating services and related costs: Spencer, 100 hours; Ray, 50 hours; Eugene, 25 hours.

Transcribed Image Text:

Expected Salary S 80,000 Expected Hours 1,750 2,150 Spencer Ray Eugene. 55,000 1,500 5,400 Total. $200,000