Cost-plus and market-based pricing. Construction Temps, a large labour contractor, sup¬

plies contract labour to building construction companies. For 2007, Construction Temps has budgeted to supply 80,000 hours of contract labour. Its variable cost is $14.40 per hour and its fixed costs are $288,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labour at full cost plus 20%.

Required 1. Calculate the price per hour that Construction Temps should charge on the basis ofMason’s proposal.

2. $heila Woods, the marketing manager, has supplied the following information on demand levels at different prices:

Price per Hour Demand (Hours)

$19.20 120,000 20.40 100,000 21.60 80,000 22.80 70,000 24.00 60,000 Construction Temps can meet any ofthese demand levels. Fixed costs will remain unchanged for all the preceding demand levels. On the basis of this additional information, what price per hour should Construction Temps charge?

3.Comment on your answers to requirements 1 and 2. Why are they the same or not the same?