Benson Remanufacturing rebuilds spot welders for manufacturers. The following bu

Question

Benson Remanufacturing rebuilds spot welders for manufacturers. The following budgeted cost data for 2011 is available for Benson.

Time charges Material loading charges

Technicians' wages and benefits $228,000 -
Parts manager's salary and benefits - $42,500
Office employee's salary and benefits 38,000 9,000
Other overhead 15,200 24,000


Total budgeted costs 281,200 $75,500


The company desires a $35 profit margin per hour of labor and a 25% profit margin on parts. It has budgeted for 7,600 hours of repair time in the coming year, and estimates that the total invoice cost of parts and materials in 2011 will be $400,000.

1. Compute the rate charged per hour of labor.
2.Compute the material loading percentage.
3. Sharrer Corporation has requested an estimate to rebuild its spot welder. Benson estimates that it would require 40 hours of labor and $2,500 of parts. Compute the total estimated bill. (Round answer to 2 decimal places, e.g. 10.50. Use the rounded amounts from the previous questions when calculating the answer for this question.)

Explanation / Answer

1) Rate Charged per Hour of Labor = Labor Cost / Total Labor Hours
Rate Charged per Hour of Labor = 228,000 / 7,600
Rate Charged per Hour of Labor = $30

2) Material Holding Percentage = Material Loading Charges / total invoice cost of parts and materials
Material Holding Percentage = 75,500 / 400,000
Material Holding Percentage = .18875 = 18.875%

3)

Particulars    Amount Labor Cost (40 hours * $30) $1,200.00 Material Cost ($2,500 for parts) $2,500.00 Profit Margin ($35 * 40) + (Material cost * 25%) $2,025.00 Total Estimated Bill $5,725.00

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