Nordholm Construction Company builds houses. Each job requires a bid. Nordholm's bidding policy is to estimate the costs of materials, direct labour, and subcontractor's costs. These are totaled and a markup is applied to cover overhead and profit. In the coming year, Nordholm believes it will be the successful bidder on ten jobs with the following total revenues and costs:
The residual will cover overhead and profits.
Required:

a.
What is the markup percentage on total direct costs?
b.
Suppose Nordholm is asked to bid on a job with estimated direct costs of £55,000. What is the bid? If the customer complains that the profit seems pretty high, how might Nordholm counter that?

Question

Nordholm Construction Company builds houses. Each job requires a bid. Nordholm's bidding policy is to estimate the costs of materials, direct labour, and subcontractor's costs. These are totaled and a markup is applied to cover overhead and profit. In the coming year, Nordholm believes it will be the successful bidder on ten jobs with the following total revenues and costs:
The residual will cover overhead and profits.
Required:
  
a.
What is the markup percentage on total direct costs?
b.
Suppose Nordholm is asked to bid on a job with estimated direct costs of £55,000. What is the bid? If the customer complains that the profit seems pretty high, how might Nordholm counter that?

Quizplus · Accepted Answer

The Answer of Nordholm Construction Company builds houses. Each job requires a bid. Nordholm's bidding policy is to estimate the costs of materials, direct labour, and subcontractor's costs. These are totaled and a markup is applied to cover overhead and profit. In the coming year, Nordholm believes it will be the successful bidder on ten jobs with the following total revenues and costs:
The residual will cover overhead and profits.
Required:
  
a.
What is the markup percentage on total direct costs?
b.
Suppose Nordholm is asked to bid on a job with estimated direct costs of £55,000. What is the bid? If the customer complains that the profit seems pretty high, how might Nordholm counter that?

Nordholm Construction Company Builds Houses