Bill owns Owens Construction, a small general contractor organization that specializes in high-end bathroom renovations. Currently Bill is billing at a flat rate of $30.00 per square foot of the space being demolished. Bill is concerned that his current method results in underbidding his projects and missing out on additional profit. He is putting together an estimate for Leslie, a potential bathroom remodel client, and has determined the following activities are needed to complete the job:
Bill would like to add a 30% markup to the cost to arrive at the final bid price. Use Activity-Based Costing (ABC) to answer the following questions.
a. What is the initial pre-markup price for all of the estimated work?
b. What is the final bid price that Bill will present to the customer?
c. How much profit will Bill make and/or lose if he chooses to use ABC rather than his current flat rate?

Question

Bill owns Owens Construction, a small general contractor organization that specializes in high-end bathroom renovations. Currently Bill is billing at a flat rate of $30.00 per square foot of the space being demolished. Bill is concerned that his current method results in underbidding his projects and missing out on additional profit. He is putting together an estimate for Leslie, a potential bathroom remodel client, and has determined the following activities are needed to complete the job:
  Bill would like to add a 30% markup to the cost to arrive at the final bid price. Use Activity-Based Costing (ABC) to answer the following questions.
a. What is the initial pre-markup price for all of the estimated work?
b. What is the final bid price that Bill will present to the customer?
c. How much profit will Bill make and/or lose if he chooses to use ABC rather than his current flat rate?

Quizplus · Accepted Answer

The Answer of Bill owns Owens Construction, a small general contractor organization that specializes in high-end bathroom renovations. Currently Bill is billing at a flat rate of $30.00 per square foot of the space being demolished. Bill is concerned that his current method results in underbidding his projects and missing out on additional profit. He is putting together an estimate for Leslie, a potential bathroom remodel client, and has determined the following activities are needed to complete the job:
  Bill would like to add a 30% markup to the cost to arrive at the final bid price. Use Activity-Based Costing (ABC) to answer the following questions.
a. What is the initial pre-markup price for all of the estimated work?
b. What is the final bid price that Bill will present to the customer?
c. How much profit will Bill make and/or lose if he chooses to use ABC rather than his current flat rate?

Bill Owns Owens Construction, a Small General Contractor Organization That