Assume that your company sells portable housing to both general contractors and the government. It sells
jobs to contractors on a bid basis. A contractor asks for three bids from different manufacturers. The
combination of low bid and high quality wins the job. However, jobs sold to the government are bid on a
cost-plus basis. This means the price is determined by adding all costs plus a profit based on cost at a
specified percent, such as 10%. You observe that the amount of overhead applied to government jobs is
higher than that applied to contract jobs. These allocations concern you. Point: Students could compare
responses and discuss differences in concerns with allocating overhead.
Write a half-page memo to your company’s chief financial officer outlining your concerns with overhead