Jester Corporation, Which Has a Maximum Labour Capacity of 30,000

question 9

Essay

Jester Corporation, which has a maximum labour capacity of 30,000 hours per month, has considerable flexibility with its customers when it comes to project completion dates. Management is considering the submission of a bid for a job to be performed for the city of Cambridge, Ontario. Costs for the job are as follows: $\begin{array}{|l|r|}\hline \text { Raw materials } & \$ 140.000 \\\hline \text { Labour costs } & 330.000 \\\hline \text { Variable overhead }\left(20^{\circ} \% \text { of labour }\right) & 66.000 \\\hline \text { Fixed overhead }(45 \% \text { of labour) } & 148.500 \\\hline \text { Allocated administrative cost } & 48.000 \\\hline \text { Total cost } & \$ 732.500 \\\hline\end{array}$ Jester's labour force is paid an average of $22 per hour and if the company wins the bid, it will have three months to complete the work. Management adds a 30% profit margin to all jobs, computed on the basis of total variable cost.
Required:
A. Compute the lowest total cost that the company would use when figuring its bid, assuming that Jester has excess capacity.
B. Compute Jester's bid if the company has no excess capacity.
C. Assume that Jester is currently working at 85% of capacity. Does the firm have sufficient time to complete the job? If not, what could the company do if it desires to do business with the city of Cambridge?

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Definitions:

Limited Liability Partnership

A partnership arrangement in which some or all partners have limited liabilities, protecting personal assets from business debts and liabilities.

Separate Legal Entity

An entity that is legally distinct from its owners or members, capable of having its own rights, duties, and obligations.

Business Organization

An entity formed for the purpose of carrying on commercial enterprise, including corporations, partnerships, and sole proprietorships.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.