Don Olsen Builds Custom Homes in Ottawa, Ontario Olsen Adds a 35% Profit Margin to All Jobs, Computed

Don Olsen builds custom homes in Ottawa, Ontario. Olsen was approached not too long ago by a client about a potential project, and he submitted a bid of $557,000, derived as follows: $\begin{array} { l | r | } \text { Land } & \$ 100,000 \\\text { Construction materials } & 130,000 \\\text { Subcontractor labour costs } & \underline { 160,000 } \\& \$ 390,000 \\\text { Construction overhead: } 30 \% \text { of direct costs } & 117,000 \\\text { Allocated corporate overhead } & \underline { 50,000 } \\\hline \text { Total cost } & \$ 557,000 \\\hline & \\\hline\end{array}$ Olsen adds a 35% profit margin to all jobs, computed on the basis of total cost. In this client's case the profit margin amounted to $194,950 ($557,000 x 35%), producing a bid price of $751,950. Assume that 50% of construction overhead is fixed.
Required:
A. Suppose that business is presently very slow, and the client countered with an offer on this home of $550,000. Should Olsen accept the client's offer? Briefly explain your response.
B. If Olsen has more business than he can handle, how much should he be willing to accept for the home? Briefly explain your response.