Your firm designs PowerPoint slides for computer training classes, and you have just received a request to bid on a special project to produce the slides for an 8-session class. From previous experience, you know that your firm follows an 85 percent learning rate. For this contract, it appears the effort will be substantial, running 50 hours for the first session. Your firm bills at a rate of $100/hour and the overhead is expected to run a fixed $600 per session. The customer will pay you a flat fixed rate per session. If your nominal profit margin is 20 percent, what will be the total bid price, the per session price, and at what session will you break even?
1. The cost per square foot for the units is given in the text together with its standard deviation. What other areas of cost or revenue are likely to have cost uncertainty? How should these uncertainties be handled?
2. How would you suggest the team handle the issue of Dr Link’s supposedly inflated medical equipment costs?