Maine Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Maine Temps has budgeted to supply 85,000 hours of contract labor. Its variable costs are $9 per hour, and its fixed costs are $255,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 15%. Read the requirements. Requirements Requirement 1. Calculate the price per hour that Maine Temps should charge based on Mason's proposal. 1. Calculate the price per hour that Maine Temps should charge based on Mason's proposal. Begin by determining the formula to calculate the price per hour based on Mason's proposal, then calculate the price. (Complete all answer b Price per hour 2. The marketing manager supplies the following information on demand levels at different prices: Price per Demand Hour (Hours) 13 123,000 14 101,000 16 85,000 17 76,000 18 65,000 Maine Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels. On the basis of this additional information, calculate the price per hour that Maine Temps should charge to maximize operating income. 3. Comment on your answers to requirements 1 and 2. Why are they the same or different? Print Done 7. Maine Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Maine Temps has budgeted to supply 85,000 hours of contract labor. Its variable costs are $9 per hour, and its fixed costs are $255,000. Rog Print Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 15%. 15 Read the requirements 15 Requirement 1. Calculate the price per hour that Maine Temps should charge based on Mason's proposal. Begin by determining the formula to calculate the price per hour based on Mason's proposal, then calculate the price. (Complete all answer boxes. Round the price per hour to two decimal places.) (1) (2) Price per hour (3) Requirement 2. On the basis of the additional information, calculate the price per hour that Maine Temps should charge to maximize operating income. First select the formula that will be used to determine the optimal price per hour, then calculate the total contribution at each price per hour. Price per hour at: $ 13 $ 14 $ 16 $ 17 $ 18 (4) (5) = Total contribution The price per hour that should be charged is (6) Requirement 3. Comment on your answers to requirements 1 and 2. Why are they the same or different? The two different approaches lead to (7) The approach in requirement 1 is (10) 15: Requirements prices in requirements 1 and 2. Pricing decisions (8) demand or market considerations and (9) supply or cost factors. The approach in requirement 2 is (11) 1. Calculate the price per hour that Maine Temps should charge based on Mason's proposal. 2. The marketing manager supplies the following information on demand levels at different prices: Price per Demand Hour (Hours) $ 13 123,000 14 101,000 16 85,000 17 18 76,000 65,000 Maine Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels. On the basis of this additional information, calculate the price per hour that Maine Temps should charge to maximize operating income. 3. Comment on your answers to requirements 1 and 2. Why are they the same or different? (1) O Variable cost per hour (2) O Budgeted hours (3) (4) O Variable cost per hour Contribution margin per hour Fixed cost per hour Full cost per hour O(100% + Markup percentage) O(100% Markup percentage) Average demand hours % Contribution margin per hour O hrs. Fixed cost per hour Full cost per hour (5) (6) $17 O $13 (7) O the same (8) Average demand hours $16 two different should consider should not consider (9) should consider should not consider (10) the more balanced approach. used as a starting point. Then it is modified based on market considerations. Budgeted hours $14 Demand hours $18 (11) the more balanced approach. used as a starting point. Then it is modified based on market considerations. Print Americo Flights is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Americo Flights segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to tr E: (Click the icon to view the pricing and ticket information.) (Click the icon to view additional information.) Requirements - X More info 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Americo Flights implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? Print Done would you? Show your computations. rs, calculate the total contribution margin at each price for each type of Data table $ Price Charged Pleasure travelers start their travel during one week, spend at least 1 weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,700 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $181,000. Number of Seats Expected to Be Sold Variable Cost per Ticket Business Pleasure 700 $ 85 300 150 1,900 180 285 45 Print Done Print Done 8. Americo Flights is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Americo Flights segments the market into business and pleasure travelers. provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: 16(Click the icon to view the pricing and ticket information.) 17(Click the icon to view additional information.) Read the requirements 18 Requirement 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Before determining if you would charge different prices to business travelers and pleasure travelers, calculate the total contribution margin at each price for each type of traveler. Total contribution margin Print Price charged $ 700 1,900 Business Pleasure Americo Flights would maximize contribution margin and operating income by charging business travelers a fare of (1) income by (3) where business travelers are charged (4) and pleasure travelers a fare of (2) Americo Flights would maximize contribution margin and operating pleasure travelers. Requirement 2. Explain the key factor (or factors) for your answer in requirement 1. Business travelers are relatively price (5) pay for their own airfare. because they must get to their destination during the week (exclusive of weekends) and their fares are paid by their companies. Pleasure travelers are price (6) because they have to (Round the percentages to the nearest tenth percent, X.X%.) An increase in fares from $700 to $1,900 will deter only In contrast, a similar fare increase will lead to a(n) travelers (7) % of the business passengers from flying with Americo Flights. % drop in pleasure travelers. The drop in demand for the pleasure offset by the total contribution margin. Requirement 3. How might Americo Flights implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price desired by the airline? Answer true or false to the following two statements in regards to how Americo Flights can implement price discrimination. (8) Airlines can require that a Saturday night stay is needed to qualify for the $700 discount fare. This requirement would discriminate between the passenger categories. (9) The statement above is illegal because airlines are service companies rather than manufacturing companies and because these practices destroy competition. 16: Data Table 17: More Info Number of Seats Expected to Be Sold Price Charged Variable Cost per Ticket Business Pleasure $ 700 $ 1,900 85 300 150 180 285 45 Pleasure travelers start their travel during one week, spend at least 1 weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,700 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $181,000. 18: Requirements 1. 2. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Americo Flights implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires? (1) O $700 $1,900 (2) O $700 $1,900 (3) setting prices at the highest level for any customer a price differentiation strategy (4) O different prices than (5) the same as insensitive (6) insensitive sensitive sensitive (7) O (8) O True (9) O True setting prices at the lowest level for any customer is not O is False False