PLEASE ANSWER QUESTION 2 ONLY

Computer Repair Inc. uses time and materials pricing, and each year it reviews its rates in light of the actual costs incurred in the prior year. Actual costs incurred last year in connection with repair work and in connection with the companys parts inventory are shown below.

Customers were billed for 20,000 hours of repair work last year.

The company has a target profit of $10 per hour of repair service time and a target profit of 40% of the invoice cost of parts used. During the past year, the company billed repair service time at $50 per hour and added a material loading charge of 40% to parts. Management feels these rates may now be inadequate, since costs have risen somewhat over the last year.

	Repairs			Parts
Repair technicianswages	$	480,000
Repair service managersalary		56,000
Parts managersalary				$	60,000
Repairs and parts assistantsalary		28,800			7,500
Retirement benefits (20% of salaries and wages)		112,960			13,500
Health insurance (5% of salaries and wages)		28,240			3,375
Utilities		120,000			24,000
Truck operating costs		19,200
Property taxes		9,280			5,400
Liability and fire insurance		6,720			3,000
Supplies		1,200			225
Rentbuilding		38,400			33,000
Depreciationtrucks and equipment		59,200
Invoice cost of parts used					600,000
Total costs for the year	$	960,000		$	750,000

Using the above data, compute the following:

a.	The rate that would be charged per hour of repair service time using time and materials pricing.

b.	The materials loading charge that would be used in billing jobs. The materials loading charge should be expressed as a percentage of the invoice cost.

2 if the company adopts the rates that you have computed (1) above, would you expect the companies profits to increase?