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Homework answers / question archive / As a service to its customers, Current Designs repairs damaged kayaks
As a service to its customers, Current Designs repairs damaged kayaks. This is especially valuable to customers that have made a significant investment in the composite kayaks. To price the repair jobs, Current Designs uses time-and-material pricing with a desired profit margin of $20 per labor hour and a 50% materials loading charge.
Recently, Bill Johnson, Vice President of Sales and Marketing, received a phone call from a dealer in Brainerd, Minnesota. The dealer has a customer who recently damaged his composite kayak and would like an estimate of the cost to repair it. After the dealer emailed pictures of the damage, Bill reviewed the pictures with the repair technician and determined that the total materials charges for the repair would be $100. Bill estimates that the job will take 3 labor hours to complete. Following is the budgeted cost data for Current Designs:
Repair technician wages ... $30,000
Fringe benefits ....... $10,000
Overhead ......... $10,000
Current Designs has allocated 2,000 hours of repair time for the upcoming year. The customer has agreed to transport the kayak to the Winona production facility for the repairs.
Instructions
Determine the price that Current Designs would charge to complete the repairs for the customer.
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|
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Total Cost |
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Total Hours |
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Per Hour Charge |
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Repair-technician’s wages |
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$30,000 |
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2,000 |
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$15 |
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Fringe benefits |
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10,000 |
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2,000 |
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5 |
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Overhead |
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10,000 |
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2,000 |
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5 |
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|
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$50,000 |
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2,000 |
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25 |
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Profit margin |
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|
|
|
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20 |
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Rate charged per hour of labor |
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|
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$45 |
Job: Composite kayak repair
Labor charges: 3 hours @ $45 $135
Materials charges
Cost of parts and materials $100
Materials loading charge (50% X $100) 50 150
Total price of labor and material $285
please see the attached file for the complete solution.
