Question

Rey Custom Electronics (RCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time-and-material pricing. The following budgeted cost data are available.

		Time Charges			Material Loading Charges
	Technicians' wages and benefits	$ 100,000			-
	Parts manager's salary and benefits	-			$ 33,000
	Office employee's salary and benefits	20,000			6,000
	Other overhead	10,000			35,750
	Total budgeted costs	$ 130,000			$ 74,750

The company has budgeted for 5,000 hours of technician time during the coming year. It desires a $ 37.00 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2017 will be $ 650,000 .

Compute the rate charged per hour of labor. (Round answer to 2 decimal places, e.g. 10.50.)

Compute the material loading percentage. (Round answer to 2 decimal places, e.g. 10.50.)

Answer 1

SOLUTION

(A)

Particulars	Time charges ($) (A)	Hours (B)	Rate per hour ($) (A/B)
Technicians' wages and benefits	100,000	5,000	20
Office employee's salary and benefits	20,000	5,000	4
Other overhead	10,000	5,000	2
Total hourly cost			26
Add: Profit margin			37
Rate charged per labor hour			63

(B)

Particulars	Material Loading charges ($) (A)	Total invoice cost ($) (B)	Loading percentage(A/B)
Parts manager's salary and benefits	33,000	650,000	0.05
Office employee's salary and benefits	6,000	650,000	0.01
Other overhead	35,750	650,000	0.06
Total			0.12
Add: 80% profit on parts			0.80
Material load percentage			0.92