Problem 11 (Cost-Plus and Market-Based Pricing)Temps, a large labor contractor, supplies contract labor to buildingconstruction companies. For 20X1, Temps has budgeted to supply 80,000hours of contract labor. Its variable cost is P120 per hour and its fixed costsare P2,400,000. Roger Mason, the general manager, has proposed a cost-plusapproach for pricing labor at full cost plus 20%.Required:1. Calculate the price per hour that Temps should charge based on Mason'sproposal.2. Sheila Ragos, the marketing manager, has supplied the followinginformation on demand levels at different prices:Demand (Hours)120,000100,00080,00070,000Price per HourP16017018019020060,000Temps can meet any of these demand levels. Fixed costs will remainunchanged for all the preceding demand levels. On the basis of thisadditional information, what price per hour should Temps charge?3. Comment on your answers to Requirements 1 and 2. Why are they thesame or not the same?

Contribution margin refers to the contribution earned by the company from the sales of its product.…

Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the preceding demand levels. On the basis of this additional information, what price per hour should Temps charge? 3. Comment on your answers to Requirements 1 and 2. Why are they the same or not the same?

Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the preceding demand levels. On the basis of this additional information, what price per hour should Temps charge? 3. Comment on your answers to Requirements 1 and 2. Why are they the same or not the same?

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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Question

Problem 11 (Cost-Plus and Market-Based Pricing)
Temps, a large labor contractor, supplies contract labor to building
construction companies. For 20X1, Temps has budgeted to supply 80,000
hours of contract labor. Its variable cost is P120 per hour and its fixed costs
are P2,400,000. Roger Mason, the general manager, has proposed a cost-plus
approach for pricing labor at full cost plus 20%.
Required:
1. Calculate the price per hour that Temps should charge based on Mason's
proposal.
2. Sheila Ragos, the marketing manager, has supplied the following
information on demand levels at different prices:
Demand (Hours)
120,000
100,000
80,000
70,000
Price per Hour
P160
170
180
190
200
60,000
Temps can meet any of these demand levels. Fixed costs will remain
unchanged for all the preceding demand levels. On the basis of this
additional information, what price per hour should Temps charge?
3. Comment on your answers to Requirements 1 and 2. Why are they the
same or not the same?

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