You are negotiating a non-competitive contract for the production of replacement
ID: 2604946 • Letter: Y
Question
You are negotiating a non-competitive contract for the production of replacement parts for equipment produced by Perry Products to meet unique Government requirements. Perry's cost proposal includes an estimated direct labor cost of $49,000 (5,000 labor hours at $9.84 per hour). The estimate is based on the following direct manufacturing labor information:
Labor Category Labor Rate Projected Labor Hours
Team Leader $14.50 250
Assembly $8.20 2000
Fabrication $7.50 1500
Production $9.00 750
QC/Test $10.00 500
Totals 5000 1. Using the above info, what weighted-average direct manufacturing labor rate should you use in preparing your manufacturing direct labor cost objective?
2. Using the above info, what should be your direct manufacturing labor cost objective for this contract?
Explanation / Answer
1.
Labour rate
Thus weighted avrage labour rate shall be $ 8.61
2. Objective must be to reduce the labour cost from $9.84 to $ 8.61
$ 8.61
Particulars Amount Tem Leader $ 3,625.00 Assembly $ 16,400.00 Fabrication $ 11,250.00 Production $ 6,750.00 QC Test $ 5,000.00 Total $ 43,025.00 No. of Hours 5000Labour rate
Thus weighted avrage labour rate shall be $ 8.61
2. Objective must be to reduce the labour cost from $9.84 to $ 8.61
$ 8.61
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