5. Greasy Spoon Service repairs commercial food preparation equipment. The follo

Question

5. Greasy Spoon Service repairs commercial food preparation equipment. The following budgeted cost data is available for 2006: Material Time Charges $600,000 Technicians' wages and benefits Parts manager's salary and benefits Office manager's salary and benefits Other overhead Total budgeted costs Charges $ 72,000 110,000 112,000 18,000 48,000 $760,000 $200,000 Greasy Spoon has budgeted for 10,000 hours of technician time during the coming year. It desires a $64 profit margin per hour of labor and a 50% profit margin on parts. Greasy Spoon estimates the total invoice cost of parts and materials in 2006 will be $500,000 Instructions 1. Compute the rate charged per hour of labor 2. Compute the material loading charge 3. Greasy Spoon has received a request from Lime Corporation for an estimate to repair a commercial fryer The company estimates that it would take 20 hours of labor and $8,000 of parts. Compute the total estimated bill 6. Sandbar Company, a division of Dudge Cars, produces automotive batteries. Sandbar sells the batteries to its customers for $82 per unit. The variable cost per unit is $38, and fixed costs per unit are S16. Top management of Dudge Cars would like Sandbar to transfer 30,000 batteries to another division within the company at a price of $54. Sandbar is operating at full capacity Instructions Compute the minimum transfer price that Sandbar should accept.

Explanation / Answer

1. Rate charged per hour of labour = 600000/10000= 60

2. Material loading charges = 500000-72000= 428000

3. Total estimated bill = A + B = 76800+12000= 88800

A. 20 hours* rate per hour(60) * profit margin (64)= 76800

B. 8000 + profit margin (50%) = 12000

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