RJB Building routinely bids on construction jobs. The company first determines the budgeted product cost of the job and then applies a markup of 45%. If a bid of $20,000 is submitted for a new job, which of the following statements applies?
A) The budgeted product cost is $20,000.
B) All costs pertaining to the job total $20,000.
C) $6,207 includes selling and administrative expense and profit.
D) $6,207 includes fixed overhead, selling and administrative expense, and profit.

Question

Quizplus · Accepted Answer

The markup of 45% suggests that the budgeted product cost is 55% of the bid amount. 
Thus, budgeted product cost = 0.55 x $20,000 = $11,000. 
$6,207 represents the selling and administrative expense and profit. Therefore, option C is the correct answer. The other options are either incorrect or incomplete.

RJB Building Routinely Bids on Construction Jobs