Hansel Corporation has requested bids from several
architects to design its new corporate headquarters. Frey Architects is one of
the firms bidding on the job. Frey estimates that the job will require the
following direct labor.
Labor Estimated
Hours Hourly
Rate
Architects 150
$
300
Staff 300
75
Clerical 500
20
Frey applies overhead to jobs at 175% of direct labor cost.
Frey would like to earn at least $80,000 profit on the architectural job. Based
on past experience and market research, it estimates that the competition will
bid between $285,000 and $350,000 for the job.
1. What is Frey’s estimated cost of the architectural job?
2. What is Frey’s Estimated selling price?
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