Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 10, Problem 21P
To determine
Ascertain the profit and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Whang Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Whang's direct costs and subcontractor costs as well as an amount referred to as “overhead and profit.” Whang's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
Revenue
$8,720,320
Direct materials
$2,245,000
Direct labor
1,741,000
Subcontractors
3,342,000
7,328,000
Overhead and profit
$1,392,320
Required:
1. Given the preceding information, what is the markup percentage on total direct costs?________%
2. Suppose Whang is asked to bid on a job with estimated direct costs of $589,000. What is the bid?$________
Whang Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Whang's direct costs and subcontractor costs as well as an amount referred to as “overhead and profit.” Whang's bidding policy is to estimate the costs of direct materials, direct labor, and subcontractors' costs. These are totaled, and a markup is applied to cover overhead and profit. In the coming year, the company believes it will be the successful bidder on 10 jobs with the following total revenues and costs:
Revenue
$9,226,800
Direct materials
$2,212,000
Direct labor
1,834,000
Subcontractors
3,643,000
7,689,000
Overhead and profit
$1,537,800
Required:
1. Given the preceding information, what is the markup percentage on total direct costs? ______%
2. Suppose Whang is asked to bid on a job with estimated direct costs of $553,000. What is the bid? $_________
3. Briefly explain how Whang Construction’s accountant might…
Jones’s proposal for a building contract was $125,500. After finding that her bid was low, she checked her
estimates and found that an item of $25,000 had been incorrectly recorded as $2,500 in making the
summary of costs. What can she do about the situation? Explain.
Chapter 10 Solutions
Construction Accounting And Financial Management (4th Edition)
Ch. 10 - What are some of the ways a company can increase...Ch. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - Determine the break-even volume of work for a...
Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - A construction company has a fixed overhead of...Ch. 10 - A construction company has a fixed overhead of...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the profit and overhead markup for a...Ch. 10 - Determine the profit and overhead markup for a...Ch. 10 - Prob. 21PCh. 10 - Prob. 22P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The Lombard Company produces and sells office-space dehumidifiers to companies that own or rent office space. (a) Lombard’s materials and labor costs for producing the dehumidifiers are $3,000 per unit and the fixed costs of its dehumidifier production plant are $1.85 million. If Lombard sells a dehumidifier for $5,000 per unit, what is its percent contribution margin? Show your work. (b) If Lombard used revenue-based compensation to pay its sales force, what would be a salesperson’s sales credit for selling 20 dehumidifiers at a price of $4,500? Show your work. (c) If Lombard used the profit-based compensation method described in the course to pay its sales force and sets the dehumidifier’s target price at $5,000 per unit, what would be a salesperson’s sales credit for selling 20 dehumidifiers at a price of $4,500? Show your work. (d) Explain the benefit to Lombard’s management of using the profit-based compensation method of Part (c) over revenue-based compensation for…arrow_forwardFor a construction firm using the cost recovery method, if costs exceed billings ons some contracts by 1,000,000 and billings exceed costs by 800,000 on others, the contracts should ordinarily be reported as a? a. current asset of 200,000 b. current liability of 200,000 c. current asset of 1,000,000 less a contra-current asset of 800,000 d. current asset of 1,000,000 and a current liability of 800,000arrow_forwardMs. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $450,000. Of this sum, $55,000 is described by the supplier as an installation cost. Ms. Potts does not know whether the company will need to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $55,000 straight-line over five years. How will the tax authority’s decision affect the after-tax cost of the kiln? The tax rate is 25%, and the opportunity cost of capital is 5%. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)arrow_forward
- In a cost center, the manager has responsibility and authority for making decisions that affect a. costs b. investments in assets c. both costs and revenues d. revenues Keating Co. is considering disposing of equipment with a cost of $68,000 and accumulated depreciation of $47,600. Keating Co. can sell the equipment through a broker for $27,000 less 8% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $46,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is a. $11,160 b. $7,812 c. $16,740 d. $13,392 If sales are $828,000, variable costs are 68% of sales, and operating income is $278,000, what is the contribution margin ratio? a. 64% b. 36% c. 68% d. 32%arrow_forwardDavis’s bid of $542,000 was the lowest on a building job. The cost of the largest construction contract he had performed previously was $78,000. What should the engineer do to determine whether or not to let the contract to Davis?arrow_forwardA contractor is assembling a bid for a lump-sum building project. The summation of all task costs is $15,000,000. Annual company revenue is $400 million, and annual home office costs are $25 million. Total job office overhead is estimated to be $3 million and desired profit is 11%. Include O&P, what lump-sum price should the contractor bid?arrow_forward
- At year-end XYZ Company has an in-process construction project with costs totaling $10,000,000. It has billed $8,000,000 on these projects and collected $6,500,000. As it employs the percentage-of-completion method it has also recognized a total of $1,000,000 in profit to date on these contracts. The XYZ balance sheet would report: Selected Answer: Incorrect Asset values totaling $1,500,000 for these projects. Answers: Correct Asset values totaling $4,500,000 for these projects. Asset values totaling $3,500,000 for these projects. Asset values totaling $1,500,000 for these projects. Liabilities values totaling $1,000,000 for these projects.arrow_forwardChan Builders Inc entered into a contract with George Company to construct a production plant. At that time, Chan Builders estimated that it would take five years to complete the facility at a total cost of P28,800,000. Chan Builders therefore, pegged the total contract price for the construction of the facility at P34,800,000. During 2010, Chan Builders incurred P7,500,000 in construction costs related to the project. Because of rising material and labor costs, the estimated cost to complete the contract at the end of 2010 amounted to P22,500,000. George was billed and paid 30% on the contract price in accordance with the contract agreement. Compute the Contract Asset (Contract Liability) for 2010. George Co. enters into a contract to build an apartment for Jungle Co. for a fixed fee of ₱20,000,000. At contract inception, George Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. George…arrow_forwardA manufacturer has been offered a contract to manufacture a certain product that will utilize the waste materials from his present product. The new product will use 0.3kg of waste materials per unit which is presently sold by the company for P2.00 per kg. Other materials to be used will cost P0.80 per unit. Direct labor per unit will cost P2.30. The present overhead costs of the company amount to P380,000 plus 40% of the total for direct materials and direct labor costs per year. The buyer will pay the manufacturer per unit an amount equal to the increment costs plus P1.20 profit. Determine the selling price of the manufacturer per unit.arrow_forward
- Condo Construction Company is bidding on an important construction job. The job will cot $2 million to complete. One other company is bidding for the job. Condo believes that the opponent's bid is equally likely to be any amount between $2 million and $4 million. If Condo wants to maximize its expected profit, what should it's bid be?arrow_forwardSwagelok Enterprises is a manufacturer of miniature fittings and valves. Over a 5-year period, the costs associated with one product line were as follows: first cost of $23,000, and annual costs of $18,000. Annual revenue was $25,000 and the used equipment was salvaged for $5,000. What rate of return did the company make on this product? What is the rate of return that the company made on the product?arrow_forwardThe following information pertains to equipment constructed by a firm for its own use. The construction is finished. Materials used in construction, P 400,000 Labor cost during construction, P 170,000 Fringe benefits on above labor, P 60,000 Incremental overhead due to construction, P 80,000 Interest expense on debt during construction, P 20,000 The interest expense meets the requirements for interest capitalization. The market value of the equipment immediately after construction was completed was P650,000. QUESTION: What is the loss on construction incurred by the firm? zero P 60,000 P 80,000 P 20,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning