(Solved by Humans)-Creative Construction Company (CCC) expects to build three new
Question
- Creative Construction Company (CCC) expects to build three new homes during the first quarter of 2008.? The estimated direct materials and labor costs are as follows:
Expected Costs????????????????? Home 1?????????? Home 2?????????? Home 3
??????????? ????? ????? Direct labor????????????????? $50,000?????????? ??????????? $40,000?????????? ??????????? $60,000
??????????????????????? Direct materials??????????? ??????????? $60,000?????????? ??????????? $80,000?????????? ??????????? $70,000
CCC needs to allocate two major overhead costs for the quarter - $30,000 of employee health insurance and $168,000 of indirect materials costs between the three houses.? CCC decides to allocate heath insurance based on labor cost and indirect material based on material cost.
CCC uses a cost-plus pricing strategy to set the selling price of each home.? The company would like to have a gross margin of 20% of total production cost for each home sold.? Based on this information, what would be the estimated selling price for Home 2?
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