Super Heating Ltd installs heating system in new homes. Jobs are priced using the time and materials method. The managing director of Super Heating is pricing a job involving the heating systems for six houses to be built by a local developer. His estimated follow:
Labour hours ………………………………….. 400
Material cost ………………………………….. $150 000
The following predictions relate to the company’s operations:
Labour rate, including on-cost ………………………………….. $40 per hour
Annual labour hours ……………………………………………. 12 000 hours
Annual overhead cost:
Material handling and storage ………………………………….. $62 500
Other overhead cost ……………………………………………. 270 000
Annual cost of materials used ………………………………….. 625 000
Required:
Super Heating adds a markup of too costs. per hour on its time charges, but there is no markup on material
1. Develop formulas for:
(a) Company’s time charges.
(b) Company’s material charges.
2 Calculate the price for the job described above.
3 What would be the price of the job if Super Heating also added a markup of 10 per cent on all material charges (including material handling and storage costs)?
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