Compu Services provides computerized inventory consulting. The office and comput

Question

Compu Services provides computerized inventory consulting. The office and computer expenses are $625,000 anually and are not assigned to specific jobs. The consulting hours avofailable for the year total 20,000, and the average consulting hour has $30 of variable costs.

Required:

If the company desires a profit of $100,000, what should it charge per hour?

What is the markup on variable costs if the desired profit is $150,000?

If the desired profit is $60,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit?

Explanation / Answer

1) if Desired Profit is $ 100000, then price per hour $ Variable Cost           6,00,000 (20000 hr X 30) Fixed Cost           6,25,000 Profit Required           1,00,000 Total        13,25,000 No of Hours available              20,000 Rate per hour                 66.25 2) if Desired Profit is $ 150000, then price per hour $ Variable Cost           6,00,000 (20000 hr X 30) Fixed Cost           6,25,000 Profit Required           1,50,000 Total        13,75,000 No of Hours available              20,000 Rate per hour                 68.75 Mark up on Varible cost 129.2% ((68.75-30)/30) 3) if Desired Profit is $ 60000, then price per hour $ Variable Cost           6,00,000 (20000 hr X 30) Fixed Cost           6,25,000 Profit Required              60,000 Total        12,85,000 No of Hours available              20,000 Rate per hour                 64.25 Mark up on Varible cost 114.2% ((64.25-30)/30)

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