Business FinancesQuestion 1111 of 1632
A contractor's annual overhead is $120,000 and he expects $600,000 in direct job costs this year. What overhead rate should he add to each job's direct cost to recover overhead?
a.25%
b.12%
c.5%
d.20%
Explanation
Overhead recovery rate = annual overhead / annual direct costs = $120,000 / $600,000 = 0.20 = 20%. He adds 20% of each job's direct cost to cover overhead, then adds profit on top.
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- Which statement about markup and margin is correct?
- A job sells for $50,000 with a 20% gross margin. What are the direct job costs?
- A contractor applies a 100% markup on a $3,000 cost. What margin does that represent, and what is the price?
- Which of the following is an example of OVERHEAD (indirect cost) rather than a direct job cost?
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)