Time and Materials Pricing in a Service Business
P 3. Ace Maintenance, Inc., repairs heavy construction equipment and vehicles. Recently, the Shanti Construction Company had one of its giant earthmovers overhauled and its tires replaced. Repair work for a vehicle of that size usually takes from one week to ten days. The vehicle must be lifted up so that maintenance workers can gain access to the engine. Parts are normally so large that a crane must be used to put them into place.
The company uses the time and materials pricing system and data from the previous year to compute markup percentages for overhead related to parts and materials and overhead related to direct labor. It adds markups of 130 percent to the cost of materials and parts and 140 percent to the cost of direct labor to cover overhead and profit. The following materials, parts, and direct labor are needed to repair the giant earthmover:
|
Quantity |
Unit Price |
Hours |
Hourly Rate |
|
Materials and parts |
Direct labor |
||
|
24 Spark plugs |
$ 3.40 |
42 Mechanic hours |
$18.20 |
|
20 Oil, quarts |
2.90 |
54 Assistant mechanic |
12.00 |
|
12 Hoses |
11.60 |
hours |
|
|
1 Water pump |
764.00 |
||
|
30 Coolant, quarts |
6.50 |
||
|
18 Clamps |
5.90 |
||
|
1 Distributor cap |
128.40 |
||
|
1 Carburetor |
214.10 |
||
|
4 Tires |
820.00 |
Required
Prepare a complete billing for this job. Include itemized amounts for each type of materials, parts, and direct labor. Follow the time and materials pricing approach, and show the total price for the job.