Question

Temp Housing Corp. manufactures modular homes for commercial customers and government agencies and has been providing emergency housing units to FEMA. FEMA has requested a bid for 120 emergency housing units to be sent out west for the wildfire victims. Your manager asked you to prepare the bid. While researching the bid, you found a invoice sent to FEMA for 200 units they purchased for hurricane victims. You also have the standard cost sheet for the model they are purchasing.

Standard cost sheet: emergency housing unit

Direct materials		$ 9,500
Direct labor	32 hours	704
Manufacturing Overhead	$3.50/direct labor hour	2,464
Total Cost		$12,668
Retail markup on total cost		25%
Retail price		$15,835

INVOICE

DATE: October 20, 2016

CUSTOMER: FEMA

QUANTITY: 200 Emergency Housing Units

SHIP TO: Sarasota, FL

Direct materials		$ 2,090,000
Direct labor		164,000
Manufacturing Overhead		575,400
Total Cost		$ 2,829,400
Government contract markup on total cost		20%
Total due		$ 3,395,760

1. Calculate the bid basing your calculations on the standard cost sheet amounts assuming a cost plus 20% government contract. (Show all calculations)
2. Calculate the total bid basing your calculations on the 2016 invoice assuming a cost plus 20% government contract. (Show all calculations)
3. Is there a difference between the two calculated bids? What do you think caused this difference?
4. What bid should you present to your manager? Explain your answer in detail. ( You may want to consult the IMA "Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management" in Chapter 1 to help guide your decision.)

Answer 1