Question

Sheridan Company provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages	$80000
Fringe benefits	$32500
Related overhead	$27500
Supply clerk’s wages	$17000
Fringe benefits	$4000
Related overhead	$20500
Profit margin per hour	$20
Profit margin on materials	12%
Total estimated consulting hours	5000
Total estimated material costs	$166000

The material loading charge is

49%.

12%.

25%.

37%.

Answer 1

Material loading charge means all costs relating to purchasing, receiving, handling and storage of materials plus it includes a desired profit percentage.

In the above question such desired profit percentage is 12%.

But also, handling storage and all such costs are also to be included.

Now we know that it is a consulting firm and all costs related to consulting won't for part of such calculation of material loading charges.

Thus, consultant wages, fringe benefits and related overheads all in respect of consultants won't for part of calculation.

Now, supply clerk means person who is responsible for material. Thus all such costs will form part of calculation of material loading charges.

Thus supply clerk wages, fringe benefits and all its related overheads are to be included.

Total amount = 17,000 + 4,000 + 20,500 = 41,500

As a % of material charges = 41,500 / 166,000

= 25%

Thus all costs in relation to material are 25% of total material costs.

But as we know, it also include profit margin.

Such profit margin is 12% as given in the question.

Thus total material loading charges = 25% + 12%

= 37%

Thus total material loading charges is 37%.