Solution-Calculate the bid price to earn target operating

Calculate the bid price to earn target operating income

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Reference no: EM133118265

Question - Herbert and Johnson is an accounting firm that specialises in auditing. Budgeted revenues for 2019 are $13,000,000. The main costs incurred by Herbert and Johnson are labour, both direct and indirect. These costs include significant year-end bonuses based on the overall success of the firm. The budgeted direct labour costs, which include salaries and anticipated bonuses, are $281,000. Budgeted indirect costs are $479,000:

Herbert and Johnson has one direct-cost category and one indirect-cost pool. Indirect costs are allocated to jobs on the basis of direct professional-hours. The mark-up rate for pricing audit engagements is intended to produce operating profit of 35% of revenues. Herbert and Johnson is preparing a tender for the audit of South Australian Events Ltd. Mr Herbert's administrative assistant has prepared a budgeted breakdown of direct professional staff costs for the audit engagement:

Direct professional-time category	Budgeted rate per hour	Budgeted hours
Assistant accountant	$49	72
Associate	$107	21
Partner	$340	4

Required - Calculate the bid price to earn target operating income-to-revenue margin of 35%?

Reference no: EM133118265

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Calculate the bid price to earn target operating income

Reference no: EM133118265

Reference no: EM133118265

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