Question

Carlos Consulting Inc. provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.
Consultants’ wages $90,000
Fringe benefits $22,500
Related overhead $17,500
Supply clerk’s wages $18,000
Fringe benefits $4,000
Related overhead $20,000
Profit margin per hour $20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs $168,000
Required:
1. The material loading charge is _________.
2. A consulting job takes 20 hours of consulting time and $180 of materials. What would be the client's bill?

Answer 1

Answer:

1. 40%

2. $1140

Explanation:

1. The material loading charge usually covers the costs of purchasing, receiving, handling, and storing materials, plus any desired profit margin on the materials themselves and expressed as a percentage of the total estimated costs of parts and materials for the year.

Step 1

Compute the supply cost:

Supply cost = Supply clerk’s wages + Fringe benefits of supply + Related overhead of supply

Supply cost = $18,000 +  $4,000 + $20,000 = $42,000

Step 2

Calculate the material loading charge:

material loading charge = ((supply costs/Total estimated material cost)×100) + Profit margin on materials

Material loading charge = (($42,000/$168,000)×100) + 15%

Material loading charge = 25% + 15% = 40%

The material loading charge is 40%

2. Calculating the Client's bill

Step 1

Calculate the estimated consultant cost (ECC):

ECC = Consultants’ wages + Fringe benefits for consultant + Related overhead for consultant

ECC = $90,000 + $22,500 + $17,500 = $130,000

estimated consultant cost = $130,000

Step 2

Calculate the total price per consulting hours (PCH)

Cost per consulting hour = estimated consultant cost /Total estimated consulting hours

Cost per consulting hour =  $130,000/5,000 = $26

Price per consulting hours = Cost per consulting hour + Profit margin per hour

Price per consulting hours = $26 + $20 = $48

total price per consulting hours = Price per consulting hours × 20

total price per consulting hours = $48 × 20 = $960

Client's bill = total price per consulting hours + $180 of materials

Client's bill = $960 + $180 = $1140

The client's bill is $1140