Question

Rey Custom Electronics (RCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time-and-material pricing. The following budgeted cost data are available.

		Time Charges			Material Loading Charges
	Technicians' wages and benefits	$ 157,636			-
	Parts manager's salary and benefits	-			$ 33,100
	Office employee's salary and benefits	24,522			18,420
	Other overhead	11,829			41,069
	Total budgeted costs	$ 193,987			$ 92,589

The company has budgeted for 5,770 hours of technician time during the coming year. It desires a $ 37.24 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2017 will be $ 736,000 .

Compute the rate charged per hour of labor. (Round answer to 2 decimal places, e.g. 10.50.)

Compute the material loading percentage. (Round answer to 2 decimal places, e.g. 10.50.)

Answer 1

			Material
Time			Loading
Charges			Charges
	Technicians' wages and benefits	$157,636			-
	Parts manager's salary and benefits	-			$33,100
	Office employee's salary and benefits	24,522			18,420
	Other overhead	11,829			41,069
	Total budgeted costs	$193,987			$92,589
	Budgeted hours =5770
Compute the rate charged per hour of labor.
	Particulars	Amount	No of labour hours	Amount per hour
	Technicians' wages and benefits	$157,636	5770	27.32
	Office employee's salary and benefits	24,522	5770	4.25
	Other overhead	11,829	5770	2.05
		Total hourly cost		33.62
		Add : desired profit		37.24
		Rate charged per labour hour		70.86
To compute the rate charged per labour hour, we can arrive it by dividing the labour cost with budgeted hours.
Compute the material loading percentage
	Particulars	Amount	Cost of parts and materials
	salary and benefits	51,520	736000	0.0700
	Other overhead	41,069	736000	0.0558
				0.1258
		Add : Profit @ 0.8		0.80
		Material load percentage		0.9258
				92.58%