Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5,000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here. Ken’s Bid Detail Dollars Direct Material $2,100 Direct Labor 1,600 Variable overhead 200 Fixed overhead 600 Profit 500 $5,000 A. The town’s social services has asked Ken if he could reduce his bid to $3,900. Should Ken accept the counter offer? Current Bid New Bid Direct Material $2,100 $2,100 Direct Labor 1,600 1,600 Variable overhead 200 200 Fixed overhead 600 Profit 500 $5,000 $3,900 _________ B. How much would his income be reduced? $___________ C. If the town’s social services guaranteed him another job next month at his normal price, could he accept this job at $3,900? _________
Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $5,000 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here.
Ken’s Bid Detail Dollars
Direct Material $2,100
Direct Labor 1,600
Variable
Fixed overhead 600
Profit 500
$5,000
A. The town’s social services has asked Ken if he could reduce his bid to $3,900. Should Ken accept the counter offer?
Current Bid New Bid
Direct Material $2,100 $2,100
Direct Labor 1,600 1,600
Variable overhead 200 200
Fixed overhead 600
Profit 500
$5,000 $3,900
_________
B. How much would his income be reduced?
$___________
C. If the town’s social services guaranteed him another job next month at his normal price, could he accept this job at $3,900?
_________
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