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 60,000 Price per Hour P160 170 180 190 200 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?

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 60,000 Price per Hour P160 170 180 190 200 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?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 10PROB

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