Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%. 1. Calculate the price per hour that Georgia Temps should charge based on Mason's proposal.2. The marketing manager supplies the following information on demand levels at different prices:RequiredTTDemand (Hours)Price per Hour124,000104,000$16171884,0001974,00061,00020Georgia Temps can meet any of these demand levels. Fixed costs will remain unchanged for all thedemand levels. On the basis of this additional information, calculate the price per hour that GeorgiaTemps should charge to maximize operating income.3. Comment on your answers to requirements 1 and 2. Why are they the same or different?

Requirement 1:Determine the Labor price per hour.

Answered: 1. Calculate the price per hour that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.

1. Calculate the price per hour that Georgia Temps should charge based on Mason's proposal.
2. The marketing manager supplies the following information on demand levels at different prices:
Required
TT
Demand (Hours)
Price per Hour
124,000
104,000
$16
17
18
84,000
19
74,000
61,000
20
Georgia 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 Georgia
Temps should charge to maximize operating income.
3. Comment on your answers to requirements 1 and 2. Why are they the same or different?

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