Reference no: EM132564098

Question - Company Epsilon is considering entering the active marketing advisory service and there has been much discussion regarding how much a marketing advisor should charge per hour of service. The company has budgeted to supply 500,000 hours of advisory service for the forthcoming year. Its variable cost is estimated at $25 per hour and its fixed costs are estimated at $500,000 for the forthcoming year. The company has been discussing whether to use a cost-plus approach or perhaps examining the demand levels. The marketing department has the following information on demand levels at different prices:

Price per hour Demand in hours

$27 520,000

$28 500,000

$29 400,000

$30 300,000

$31 225,000

Required - Calculate the price per hour Company Epsilon should charge based on a cost-plus approach for pricing the service at full cost plus 15%.

Considering the company can meet any demand level in the table above and that fixed costs will remain unchanged for all the preceding demand levels, what price per hour should the company charge?