P13-30

North Dakota Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2014, North Dakota

Temps has budgeted to supply 85,000 hours of contract labor. Its variable costs are $11 per hour, and its fixed costs are $170,000.

Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 15%.

Requirements

1.	Calculate the price per hour that ND Temps should charge based on Mason's proposal.
2.	The marketing manager supplies the following information on demand levels at different prices: ND 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 NDTemps should charge to maximize operating income.
3.	Comment on your answers to requirements 1 and 2. Why are they the same or different?

Data Table 1 Price per Hour Demand (Hours) $ 14 123,000 16 100,000 17 85,000 18 73,000 19 67,000