Your company has won a one-year contract that was planned to start on January 1, 2016 and be completed by December 31, 2
Posted: Wed May 04, 2022 8:10 am
Your company has won a one-year contract that was planned
to start on January 1, 2016 and be completed by December 31, 2016.
The work that was to be performed by the engineering department was
estimated at 1000 hours per month for the duration of the
twelve-month project using pay grade 7 employees (i.e., regular
engineers). The customer informs you that they wish to start the
project on July 1 rather than January 1, and they assume that there
is no financial impact on the total cost of the project. According
to company policy, in 2016 the project account would be charged at
a rate of $51 per hour for grade 7 employees, plus an overhead rate
of 150%. Also, a salary increase will take effect on January 1,
2017, so the hourly rate will be $54 in 2017 for the grade 7
employees. Moreover, it is expected that the overhead rate will be
increased to 155% in 2017. Is there a financial impact on the total
cost of the project, and if so, how much of an impact? The
escalation reserve should be what percentage of total cost?
to start on January 1, 2016 and be completed by December 31, 2016.
The work that was to be performed by the engineering department was
estimated at 1000 hours per month for the duration of the
twelve-month project using pay grade 7 employees (i.e., regular
engineers). The customer informs you that they wish to start the
project on July 1 rather than January 1, and they assume that there
is no financial impact on the total cost of the project. According
to company policy, in 2016 the project account would be charged at
a rate of $51 per hour for grade 7 employees, plus an overhead rate
of 150%. Also, a salary increase will take effect on January 1,
2017, so the hourly rate will be $54 in 2017 for the grade 7
employees. Moreover, it is expected that the overhead rate will be
increased to 155% in 2017. Is there a financial impact on the total
cost of the project, and if so, how much of an impact? The
escalation reserve should be what percentage of total cost?