8. The Homefires Heating Oil Company provides routine furnace maintenance and repair service at a fixed charge to its oil customers within a 25-mile radius. The company is located in Maine, which has long, cold winters and short, warm summers. This results in a seasonal demand for Homefires Heating Oil. The number of jobs forecast for the four quarters of the next year are 1,075, 960, 710, and 1,100, respectively. The typical service call requires 5.2 hours, including travel and paperwork. Employees are paid $9.85 per hour, and the typical employee provides 490 hours of direct work per quarter but will be paid for 2,080 regular hours per year plus overtime.

Homefires management wants to provide secure, permanent employment for its skilled workers and is considering using overtime, which is paid out at the rate of time-and-a-half, to meet its peak demand.

a. Compute the payroll cost if the company maintains a constant work force of sufficient size so that overtime during the peak demand will be 18 percent of regulartime capacity.

b. Repeat part

a, allowing 20 percent overtime.