Yelk Garage Uses Time and Materials Pricing What Should Yelk Set as the Direct Labor Rate Per

question 61

Multiple Choice

Yelk Garage uses time and materials pricing.It is setting prices for next year using the following information: $$\begin{array}{l}\begin{array} { l l r } \text {Labor rate, including fringe benefits}&\$ 50 \text { per hour } \\\text {Annual labor hours}&3,350 \text { hours } \\\text {Annual materials purchases}&\$ 825,000 \\\text {Materials purchasing, handling, and storage}&\$ 46,000 \\\text {Overhead for depreciation, taxes, insurance, etc.}&\$ 67,000 \\\text {Target profit margin for both labor and materials}&20 \%\end{array}\end{array}$$ What should Yelk set as the direct labor rate per hour?

• A)$70 per hour.
• B)$50 per hour.
• C)$64 per hour.
• D)$100 per hour.
• E)$84 per hour.

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Definitions:

Producer Surplus

The division in value between what producers are inclined to take for a product or service and the payoff they ultimately secure.

New Producers

Entities or individuals that have recently entered a market to offer goods or services.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual amount received from the sale, indicating the benefit to producers.

Supply Curve

A visual diagram illustrating the correlation between a product's price and the amount of it suppliers are prepared to produce.