North Dakota Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, North Dakota Temps has budgeted to supply 83,000 hours of contract labor. Its variable costs are $11 per hour, 

and its fixed costs are $166,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 25%.

 

Requirement 1. Calculate the price per hour that North Dakota 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.)

=

Price per hour

=

Requirement 2. On the basis of the additional information, calculate the price per hour that North Dakota 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.

=

Total contribution

Price per hour

at:

$

14

=

$

15

=

$

16

=

$

17

=

$

18

=

The price per hour that should be charged is

.Requirement 3. Comment on your answers to requirements 1 and 2. Why are they the same or different?

The two different approaches lead to

prices in requirements 1 and 2. Pricing decisions

should consider

should not consider

demand or market considerations and

should consider

should not consider

supply or cost factors.

The approach in requirement 1 is

the more balanced approach.

used as a starting point. Then it is modified based on market considerations.

The approach in requirement 2 is

Choose from any list or enter any number in the input fields and then continue to the next question.

REQUIREMENT:

Requirements:

1. Calculate the price per hour that North Dakota Temps should charge based on Mason's proposal.

2. The marketing manager supplies the following information on demand levels at different prices:

Price per Hour Demand (Hours)

$14 122,000

15 102,000

16 83,000

17 73,000

18 62,000

North Dakota 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

North Dakota Temps should charge to maximize operating income.

3. Comment on your answers to requirements 1 and 2. Why are they the same or different?