LINK TO TEXT LINK TO TEXT Second Chance Welding rebuilds spot welders for manufa
ID: 2571150 • Letter: L
Question
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Second Chance Welding rebuilds spot welders for manufacturers. The following budgeted cost data for 2017 is available for Second Chance.Time
Charges Material
Loading
Charges Technicians' wages and benefits $197,600 - Parts manager's salary and benefits - $39,100 Office employee's salary and benefits 53,200 13,975 Other overhead 30,400 20,950 Total budgeted costs $281,200 $74,025
The company desires a $35.00 profit margin per hour of labor and a 20.00% 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 2017 will be $419,000.
Explanation / Answer
a.
Rate charged per hour of labor will be calculated as follows:
Rate charged per hour of labor
= (Total budgeted costs for time charges / Number of hours) + Profit margin
= ($281,200 / 7,600 hours) + $35
= $72
b.
Material loading percentage will be computed as follows:
Material loading percentage
= (Total budgeted costs for material loading charges/Total invoice cost of parts and materials) + Profit margin
= ($74,025/$419,000) + 20%
= 37.67%
c.
Total estimated bill
= (Labor hours required x rate charged per hour of labor) + (Cost of parts required x material loading percentage)
= (40 hours x $72) + ($2,300 x 37.67%)
= $3,746.41
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