LaborTechs, LLC supplies contract labor (certified mechanics and technicians) to aircraft maintenance, repair, overhaul, and manufacturing companies. For the most recent year, LaborTechs budgeted to supply 86,000 hours of contract of labor. Its variable costs are $35 per hour and its fixed costs are $430,000. Roger Newton, the general manager, has always used a cost-plus approach for pricing contract labor at full cost plus 20%.

1.Calculate the price per hour that LaborTechs will charge using Newton's cost-plus approach to pricing.

2.The marketing manager at LaborTechs has studied the relation between price and demand for LaborTechs' services and supplies the following schedule of demand at different prices:

Price per hour Estimated Demand (hours)

$44.00 127,000

$46.00 107,000

$48.00 86,000

$50.00 73,000

$52.00 60,000

Calculate the price per hour that LaborTechs should charge to maximize net operating income.

3. Calculate a succinct statement comparing the advantages of the cost-plus pricing approach in question 1 and the pricing approach in question 2.