John is a carpenter who specializes in bathroom renovations for single-owner homes. He believes that he has been underbidding his projects and losing out on potential profit that could make all of the difference for his business's continued viability. He is putting together an estimate for a potential client and has determined the following activities:
Previously, John was billing at a flat rate of $6 per square foot with no additional markups. John would like to add a 25% markup to the cost to arrive at a final bid price that will be given to the customer. Using Activity-Based Costing (ABC), what is the final bid price that will be presented to the customer?

Question

John is a carpenter who specializes in bathroom renovations for single-owner homes. He believes that he has been underbidding his projects and losing out on potential profit that could make all of the difference for his business's continued viability. He is putting together an estimate for a potential client and has determined the following activities:
 Previously, John was billing at a flat rate of $6 per square foot with no additional markups. John would like to add a 25% markup to the cost to arrive at a final bid price that will be given to the customer. Using Activity-Based Costing (ABC), what is the final bid price that will be presented to the customer?

Quizplus · Accepted Answer

To answer this question, first determine the estimated cost for each activity. Demo, $2.25 × 400 square feet = $900; Cabinets, $176 × 4 hours = $704; and Tile, $0.78 × 1,218 tiles = $950.04. Once they are totaled, the initial price is $2,554.04. The last step is to add the markup: $2,554.04 × 1.25 = $3,192.55 (Choice D).

John Is a Carpenter Who Specializes in Bathroom Renovations for Single-Owner