Rolando C Drilo Jr.

BSBA 4
I. LEARNING ACTIVITIES

1. What is time and material pricing? Where is it often used?

Time and materials pricing is used in the service and construction industries to bill
customers for a standard labor rate per hour used, plus the actual cost of materials
used. The cost of materials charged to the customer is for any materials actually used
during the performance of services for the customer.
2. What is target cost?
A target cost is the maximum amount of cost that can be incurred on a product,
however, the firm can still earn the required profit margin from that product at a
particular selling price.
3. What is the formula for determining the target selling price with cost-plus pricing?

Selling price = fixed cost + (markup percentage X fixed cost).

Compute a target selling price using cost-plus pricing.
a. Selling price = variable cost + (markup percentage + variable cost).

II. ASSIGNMENT

Gruner corporation produces snowboard. The following per unit cost information is
available: direct materials P12; direct labor P8; variable manufacturing overhead P6;
fixed manufacturing overhead P14; variable selling and admin exp P4; fixed selling and
admin exp P12. Using a 32% markup percentage on total per unit cost, compute the target
selling price.

Direct materials 12
Direct labor 8
Variable manufacturing overhead 6
Fixed manufacturing overhead 14
Variable selling and administrative expenses 4
Fixed selling and administrative expenses 12
Total cost per unit P56

SELLING PRICE = 56+(0.32*56)

= 73.92

III. EVALUATION

Timothy Remanufacturing rebuilds spot welders for manufacturer. The following

budgeted cost data for 2020 is available for Padong
 Material
Time Charge Loading
Charges
Technician's wages and benefits 228,000.00
Parts managers' salary and benefit 42,500.00
Office employee's salary and benefits 38,000.00 9,000.00
Other overhead 15,200.00 24,000.00
Total budgeted cost 281,200.00 75,500.00

The company desires a P35 profit margin per hour of labor and a 25% profit margin on
parts. It has budgeted for 7,600 hours of repair time in coming year, and estimates that
the total invoice of parts and materials in 2020 will be P400,000.

Required:

1. Compute the rate charges per hour of labor.

2. Compute the material loading percentage
3. Chloe Corporation requested an estimate to rebuild its spot welder. Padong estimates
that it would require 40hors of labor and P2,500 of parts. Compute the total estimate
bill.

A. Compute the rate charged per hour of labor.

Hourly labor rate for repairs Total cost Total hours Per hour charge
Technicians wages and
benefits 228,000 7,600 30
Overhead costs
Office employees salary and
benefits 38,000 7,600 5
Other overhead 15,200 7,600 2
Total 37
Profit margin 35
Total rate charges per hour
of labor 72
B. Compute the material loading percentage.

Material Total invoice cost, Material loading

Overhead costs charges parts and materials charge
Parts manager's salary and
benefits 42,500
Office employee's salary and
benefits 9,000
0.1287
Total 51,500 400,000 5 12.88%
Other overhead 24,000 400,000 0.06 6%
0.1887
5 18.88%
Profit margin 25%
Total material loading charge 43.88%

1. C Chloe Corporation requested an estimate to rebuild its spot welder. Padong

estimates that it would require 40hors of labor and P2,500 of parts. Compute the total
estimate bill.

Labor
charges
40 72 2,880
Material charges
Cost of part and materials 2,500
Material loading charge (43.88%
*2,500) 1,097
Total price of labor and materials 3,977