The Zanzibar Company has a significant increase in business around Christmas. In past years it has hired 10 extra employees for December, with each employee working 200 hours. As a result of using seasonal employees, the company pays the full 5.4% of the 6.2% FUTA tax to the state on these salaries as well as on the salaries of its 20 yearround employees. The company is confident that if it did not have this seasonal employment problem, it could achieve a merit rating and could pay only 4.6% to the state for the FUTA tax. The company estimates that hiring each employee costs $50 in interviewing and processing costs. As an alternative for 2000, Zanzibar Company is considering using employees provided by Temphelp, a company that specializes in providing temporary employees. Zanzibar would have to pay Temphelp $6 per hour per employee, but Temphelp would pay all social security and federal and state unemployment taxes.

Required: Using the rates provided in this chapter, what is the company wage rate at which it would make no difference to Zanzibar Company if it hired its own employees or used Temphelp?

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