TDM Temps supplies contract student workers to local businesses. For the 2017/2018 academic year, TDM Temps has budgeted to supply 84,000 hours of student labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Tas K. Master, student labor coordinator, has proposed a cost-plus approach for pricing student labor at full cost plus 20%.
Information regarding demand levels at different prices is given below.
|
Price per hour
|
Demand (hrs)
|
|
$ 16
|
124,000
|
|
$ 17
|
104,000
|
|
$ 18
|
84,000
|
|
$ 19
|
74,000
|
|
$ 20
|
61,000
|
TDM Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels.
Required
1- Calculate the price per hour that TDM Temps should charge based on Master's proposal.
2- Calculate the price per hour that TDM Temps should charge to maximize operating income.