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CTC 475 Review

CTC 475 Review. Inflation. CTC 475. Job Quotes. Objectives. Know how to give job quotes. Job Quotes. Must Consider: Labor Material Overhead Profit. Methods for Determining Overhead. Rate per Direct Labor Hour Percentage of Direct Labor Cost Percentage of Prime ( Labor+Matl ) Cost.

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CTC 475 Review

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  1. CTC 475 Review • Inflation

  2. CTC 475 Job Quotes

  3. Objectives • Know how to give job quotes

  4. Job Quotes Must Consider: • Labor • Material • Overhead • Profit

  5. Methods for Determining Overhead • Rate per Direct Labor Hour • Percentage of Direct Labor Cost • Percentage of Prime (Labor+Matl) Cost

  6. Job Quotes Example – Historical Data

  7. Job Quotes Example • Determine quote using all 3 methods for a job that will need: • 40 hours of direct labor and • $850 of direct material

  8. Method 1: Rate per Direct Labor Hour • Distribute overhead by labor hours: • Rate = Ovhd/Labor Hrs. = $360,000/48,000 • =$7.50 per direct labor hour

  9. Method 1: Rate per Direct Labor Hour – Job Quote

  10. Method 2: Rate per Direct Labor Cost • Distribute overhead by labor cost: • Rate = Ovhd/Labor Cost = $360,000/$480,000 • =75%

  11. Method 2: Rate per Direct Labor Cost – Job Quote

  12. Methods 1 & 2 • Yield same result if the rate per direct labor hour is average labor rate

  13. Method 3: % of Prime Cost • Distribute overhead by prime cost: • Rate = Ovhd / Direct Labor + Direct Material Cost = $360,000/($480,000+$600,000) • =33.3%

  14. Method 3: Rate per Prime Cost – Job Quote

  15. Method 3 • Gives different answer than method 1/2

  16. Different companies use different methods • Most common is method 1 • Consulting firm I worked at– similar to method 2

  17. Cost Centers • Average overhead rates may not work if you make products that are very different • Can split costs among departments • i.e. architect dept., engineering dept.

  18. Job Quotes (w/ profit) • Our previous examples did not include profit • Profit must be added • Assume a job requires $500 worth of material and 30 direct labor hours (@ $6/hr). Using a $3/hour overhead rate and a profit margin of 20%, determine the job quote

  19. Job Quote Example (w/profit)

  20. Next lecture • Estimating Costs

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