Question

HH Auto Repair reports the following information for the coming year.

Labor rate, including fringe benefits	$	56	per labor hour
Annual labor hours		12,000	hours
Annual materials (parts) purchases	$	2,200,000
Annual overhead costs:
Materials purchasing, handling, and storage	$	418,000
Other overhead (depreciation, insurance, taxes, rent)	$	192,000
Target profit margin (on both labor and materials)		31	%

1. Compute the price (rate) per hour of direct labor. (Round your answer to 2 decimal places.)
2. Compute the materials markup (in %).
3. What price should the company quote for a job requiring five labor hours and $780 in parts? (Round your answer to 2 decimal places.)

Answer 1

Answer
1	Total labor rate	$                              72.00
2	Materials markup	50%
3	Total price quote	$                         1,687.54
Above figures have been calculated in the following manner:
1	Total labor rate	56+($192,000/12,000)
2	Materials markup	418,000/$2,200,000)+31%
3	Total price quote	((780*1.19)+(72*5))*1.31