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    The Final Price Adjustment: Defective Pricing

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    Calculate the amount of the final price adjustment because of defective pricing based on the following:

    Contractor unintentionally overpriced their material costs by $75,000 and under-priced their direct manufacturing labor costs by $50,000. Overhead rates used to price the original contract are given below:

    Material OH 15%
    Engineering OH 75%
    Manufacturing OH 124%
    Lawn Maintenance OH 1.5%
    G & A 24%

    © BrainMass Inc. brainmass.com May 20, 2020, 10:42 pm ad1c9bdddf
    https://brainmass.com/business/business-math/the-final-price-adjustment-defective-pricing-526546

    Solution Preview

    Let us consider that the costs for Material, Engineering, Manufacturing and Lawn Maintenance were originally X, Y, Z and W respectively.

    Total Cost Input = (X + 15% of X) + (Y + 75% of Y) + (Z + 124% of Z) + (W + 1.5% of W)
    = 1.15X + 1.75Y + 2.24Z + 1.015W

    Total Cost = ...

    Solution Summary

    Solution starts with representing the original costs for Material, Engineering, Manufacturing and Lawn Maintenance by variables and then develops a formula to compute the final price adjustment because of defective pricing.

    $2.19

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