Question

Shale Remodeling uses time and materials pricing. It is setting prices for next year using the following information: Labor rate, including fringe benefits Annual labor hours Annual materials purchases Materials purchasing, handling, and storage Overhead for depreciation, taxes, insurance, etc. Target profit margin for both labor and materials $ 75 per hour 6,350 hours $1,206,250 $ 241,250 $ 666,750 25 % What is the total price for a project requiring 160 direct labor hours and $150,000 of materials? Multiple Choice $184,000. O $210,000 O $256,000 $225,000 $253,500.

Answer 1

	Material Cost
	Purchased		$       1,50,000
	Add: Profit Margin		$           37,500
	(150000*.25)
	Add:
	Purchasing, Handling, and storage		$           30,000
	(241250/1206250 *150000)
	Total		$       2,17,500
	Labor Cost
	Direct Labor		$           12,000
	(160 direct labor hours *$75 per hour)
	Add:
	Overhead Cost		$           16,800
	($666750/6350 *160 Hours)
	Subtotal		$           28,800
	Add: Profit Margin		$             7,200
	($28800*25%)
	Total		$     36,000.00
	Therefore total price of the project
	=$217500+36000
	=$253500
	Therefore the last option is correct.