MANAGERIAL ACCOUNTING

Liren Electric Motors employs a highly skilled workforce. Each engineer makes $90 per hour worked. The recession means that Liren has more engineers than it currently needs, but it does not want to fire any of its engineers. Liren has the option to furlough engineers, paying them $60 per hour but not requiring them to come to work. Liren also has the option of using engineers to do administrative tasks, paying the engineers $90 per hour. These tasks would otherwise be outsourced at a cost of $25 per hour.

Liren is considering bidding on a job that would require 600 hours of engineering time. The job would use 200 hours from engineers who otherwise would have been furloughed and 400 hours from engineers who otherwise do administrative tasks.

If labor is the only cost, find the minimum price that Liren should bid, i.e., the bid at which Liren would be indifferent between winning the bid and not winning the bid.