A small renovation company is bidding on a kitchen remodel. They estimate the direct material costs at $12,500 and direct labour costs at $7,800. Their overhead rate is 20% of direct costs, and they aim for a profit margin of 10% on the total estimated cost (including overhead). What is the final bid price for the kitchen remodel?

Question: A small renovation company is bidding on a kitchen remodel. They estimate the direct material costs at $12,500 and direct labour costs at $7,800. Their overhead rate is 20% of direct costs, and they aim for a profit margin of 10% on the total estimated cost (including overhead). What is the final bid price for the kitchen remodel?

Answer options:

• $20,300.00
• $24,360.00 ✅ $26,800.00
• $29,060.00

Correct answer: $26,800.00

Explanation: First, sum direct costs: $12,500 (materials) + $7,800 (labour) = $20,300. Calculate overhead: $20,300 * 0.20 = $4,060. The total cost (direct + overhead) is $20,300 + $4,060 = $24,360. To achieve a 10% profit on the total estimated cost, the total cost represents 90% of the bid price (100% - 10% profit). So, the bid price is $24,360 / 0.90 = $27,066.67. Option C is the closest within rounding. (Note: The profit calculation is often a markup on total cost, not a percentage of the final price, which can lead to slight variations depending on how 'profit margin' is interpreted by the company). Re-calculating using a profit margin of 10% on the total cost ($24,360 * 1.10 = $26,796), Option C is the best fit.