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D5 Assume that your company sells portable housing to both general contractors and the government. It...

D5 Assume that your company sells portable housing to both general contractors and the government. It sells jobs to contractors on a bid basis. A contractor asks for three bids from different manufacturers. The combination of low bid and high quality wins the job. However, jobs sold to the government are bid on a cost-plus basis. This means the price is determined by adding all costs plus a profit based on cost at a specified percent, such as 10%. You observe that the amount of overhead applied to government jobs is higher than that applied to contract jobs. These allocations concern you. Point: Students could compare responses and discuss differences in concerns with allocating overhead. Required Write a half-page memo to your company’s chief financial officer outlining your concerns with overhead allocation.

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Answer:

Memorandum

To: Government Contractors

From Project manager

Date:

Topic: Overhead expenses very high

This is to inform you that after reviewing the details about the job card given to you, we are able to identify that cost of the construction is very high compared to other contractors.

  • since we are paying you the bid a cost plus basis the total cost per the company for paying for you is much higher cost that we are paying for other contractors.
  • On behalf of having detailed review of your job card we identified that the overhead expenses allocated to the particular project is much higher
  • Than the what we have expected
  • Since the increase have a huge impact on the total cost for company.
  • We would request you please review the cost details and over head allocation

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ekkarill92 answered 5 months ago
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