ABC Company receives a contract from one of its major customers. The contract calls for 20,000 hours of work billed at $75 per hour to be completed within one year. The normal billable work for each engineer is 2000 hours per year. Thus, the contract requires the involvement of 10 full-time engineers. At the present time, the company has only six full-time engineers who may be able to work on this contract. The engineers’ wages average $40 per hour. If the engineers are to work overtime, their overtime pay is time and a half (i.e.,

$60 per hour).

a. What would be the contribution margin if 10 engineers were available with no need to work overtime?

b. What would be the contribution margin if all six engineers were used full time and the deficiency made up through 8000 hours of overtime?

c. What would be the contribution margin if the company hired two more fulltime engineers and made up the rest with overtime?

d. If the cost of recruiting and training each new engineer is $15,000, what would be the contribution margin on hiring two new engineers, after factoring in recruiting and training costs?