Florida Temps, a large labor contractor, supplies contract labor to construction companies. For 2020, Florida Temps has budgeted to supply 82,000 hours of contract labor. Its variable costs are $11 per hour, and its fixed costs are $328,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 15%.

Required:

1. Calculate the price per hour that Florida Temps should charge based on Mason’s proposal.
2. The marketing manager supplies the following information on demand levels at different prices:

Florida Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels. On the basis of this additional information, calculate the price per hour that Florida Temps should charge to maximize operating income.
3. Comment on your answers to requirements 1 and 2. Why are they the same or different?

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Price per Hour Demand (Hours) $16 18 19 20 22 123,000 101,000 82,000 71,000 66,000