I do not know what's standard for your particular business niché.
However, your "cost of materials" seems exceptionally out of line to me.
Charging for software, hardware, and training which you will use for every client you ever have seems ludicrous to me. Detailing that in a quote/bid for me, would instantly mean I wanted to anger my clients. Operating expenses are not part of a bid/quote. Operating expenses are built into hourly rates as your overhead and customarily not treated as items every client is directly invoiced for.
Think of it this way, if your car breaks down and you take it to a mechanic, does the mechanic charge you for his wrench? The lift? the air tools? The garage? That's essentially what you are telling your clients. Even though you would use these tools for every conceivable client you ever have you want this client to pay directly for them.
To me, you are simply calculating costs incorrectly.
Hourly rate = ((yearly overhead / billable hours per year) + profit margin
Overhead =
yearly electricity cost +
yearly water cost +
yearly heat cost +
yearly rent/mortgage fees +
yearly travel expenses +
yearly phone cost +
yearly training expenses +
yearly software cost +
yearly hardware maintenance expenses +
etc.
So for example, I calculate that I will work 5 days a week for 40 weeks of the year at 6 hrs per day (6 hrs x 5 days x 40 weeks = 1,200 billable hours per year). And I know it costs me $25,200 a year for Overhead. Divide that by the 1200 billable hours and I know it costs me $20.83/hr to operate. So a minimum hourly rate is $21 (I'd round up.) Then add your profit margin to calculate hourly rate. Commonly 20% is used for profit. So, let's say 20% ($4.20) for profit. Rounding up, the hourly rate would be $26/hr. You don't have to use 20% this is just an example. In some markets, you could easily use 50%, 100%, or even 200% and still gain work. The point is you should know your minimum hourly rate needed for overhead.
This builds your operating costs (overhead) into your hourly rate. If you aren't doing this.. where are you getting your hourly rate from???? Are you just guessing at it??
Even if you want to use a much larger profit margin you should still calculate your overhead. Without knowing your overhead how do you know what is too low of a bid? How do you know when you are losing money on a project? What if you bid a project for $20/hr and your overhead is actually $25/hr? You'd be losing money with every hour you worked.
Material costs should be reserved for materials directly needed for ONLY this project. So, if this particular project requires a license for a third party software package, or this client is requesting the use of a particular typeface which carries a cost with it, then those would be added as materials costs. Material costs should never include anything you require to run operations every day you're in business that is overhead, not materials.
Unfortunately, for this client, you may have shot yourself in the face. If your proposed hourly rate was lower than your operating expenses (overhead) it is not going to look favorably if you you return with lower "material" costs and a higher hourly rate. The client will most likely figure out you are adding to the hourly rate to increase return on the project and, even if it is to legitimately cover expenses, it will still look simply like number shuffling. If you keep your proposed hourly rate the same and remove the "material" costs, the client may feel you were trying to take advantage of them with the first quote/bid. I'm just speculating based on my own experience, but this particular client may be a loss due to the misstep when bidding.
