RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?
A)The budgeted product cost is $20,000.
B)$6,207 includes selling and administrative expense and profit.
C)All costs pertaining to the job total $20,000.
D)$6,207 includes fixed overhead, selling and administrative expense, and profit.

Question

Quizplus · Accepted Answer

The bid of $20,000 includes both the budgeted product cost and a 45% markup. To find the budgeted product cost, we can set up the equation: Budgeted Cost + 0.45(Budgeted Cost) = $20,000. Solving this, the budgeted cost is $13,793 (approximately, since the exact figure might slightly vary due to rounding). The markup, therefore, is $20,000 - $13,793 = $6,207. This markup includes profit and possibly some indirect costs like selling and administrative expenses, but the question does not specify that it includes fixed overhead, making option B the correct choice.

RJB Building Routinely Bids on Construction Jobs