a. Q-Constructions workers’ have approached the building union and been informed they could be paid a higher salary and want their salaries to be determined based on a percentage of the project price. The company has reviewed their historical records on the number of projects per year and has made the decision to respect the workers’ demands and notice that the company would maintain a positive financial outlook if they set their break-even target at 4 projects per year. Determine the new salary percentage for the onsite workers’ on a project price based on the company’s average project price and associated costs in Table 2. b) Based on the new on-site workers’ cost per project from part (a), calculate the new number of projects that need to be completed to maintain a profit of $500,000 per year.
Q-Constructions has tasked you to investigate the number of construction projects per year for which the company would need to break-even and make a profit of $500,000 per year. The average price of a building contract is $700,000 per project. The following are the fixed and variable costs of Q-Constructions in Table 2:
|
Description |
Cost |
|
Office Space |
55,000 |
|
Professional Staff Salaries |
205,000 |
|
Insurances |
50,000 |
|
Machine Maintenance |
80,000 |
|
Website Management |
30,000 |
|
On-site workers’ salaries |
$120,000 per project |
|
Average Material Cost |
60% of the project price per project |
Table 2: Associated Costs of Q-Constructions
a. Q-Constructions workers’ have approached the building union and been informed they could be paid a higher salary and want their salaries to be determined based on a percentage of the project price. The company has reviewed their historical records on the number of projects per year and has made the decision to respect the workers’ demands and notice that the company would maintain a positive financial outlook if they set their break-even target at 4 projects per year. Determine the new salary percentage for the onsite workers’ on a project price based on the company’s average project price and associated costs in Table 2.
b) Based on the new on-site workers’ cost per project from part (a), calculate the new number of projects that need to be completed to maintain a profit of $500,000 per year.
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