Exhibit 4-2 a Construction Company Is Preparing for a Nine-Month Project, and Project

question 9

Essay

Exhibit 4-2
A construction company is preparing for a nine-month project, and will need to develop a staffing plan. The company can assign up to 30 of its own full-time employees to the project, and will hire short-term contract employees to make up any shortage in meeting the personnel requirements. Company employees earn $6,000 per month, while short-term contract employees make $8,600/month. Contract employees can be assigned to the project beginning in any month, and their contract period is two months. The number of workers required for the project by month is shown below:

-Refer to Exhibit 4-2.Suppose the bonus for completing the project three months early is $250,000.What would be the net bonus to the company,after adjusting for any difference in personnel costs under the accelerated schedule

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Definitions:

Current Costs

The costs that would have to be incurred to replace or reproduce an asset in the current period, under current market conditions.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Net Income

The total earnings of a company after accounting for all expenses, taxes, and additional income streams, representing the company’s profit.

Inventory Levels

The quantity of goods and materials on hand available for sale or used in production at any given time within a business.