Hospedeiras de Portugal Lda, a large labour contractor, supplies contract labour to building construction companies. For 2018, Hospedeiras has budgeted to supply 80,000 hours of contract labour. Its variable cost is €12 per hour and its fixed costs are €240,000. Manuel Girardi, 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 Hospedeiras should charge based on Manuel’s proposal. 

2. Mirella Restrepo, the marketing manager, has supplied the following information on demand levels at different prices:

Hospedeiras can meet any of these 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 Hospedeiras charge? 

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

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Price per hour Demand (hours) €16 120 000 17 100 000 18 80 000 19 70 000 20 60 000