Pender Ltd

question 97

Essay

Pender Ltd. is analyzing two proposals for cleaning contracts for the next 3 year period. The company has 200,000 square metres of floor space which is currently 75% occupied. It expects that occupancy will increase to 82% in year 2 and 90% in year 3.
The proposal from Company A is as follows:
Six janitors will be used at a budgeted annual salary of $26,000/each. These salaries are expected to remain static over the 3 year period. One supervisor will be used at an annual salary of $38,000. Salary increases for the supervisor will be $1,500 per year. Indirect labour costs are at 12.5% of salaries. Indirect material costs will be at a rate of $0.20 per square metre occupied. Fixed costs of $7,200 per year will also be charged to Pender by the contractor.
The proposal from Company B is as follows:
A rate of $1.40 per square metre occupied will be charged. In addition a part time supervisor will be required at an annual cost of $24,000 plus benefits at 15%. Fixed costs of $4,600 per year will be charged to Pender by Company B. No increases are forecast through the three year period.
Additional information:
Company A is the existing contractor. If the agency does not choose Company A, it must pay Company A a flat $8,000 on termination of its services. This payment would be made immediately.
Assume cash flows occur at the end of the year unless otherwise stated. The discount rate to be used is 6% and is not expected to change in the next 3 years.

Understand how price floors and price ceilings affect market equilibrium and lead to surpluses or shortages.

Recognize the impact of minimum wage laws on employment, training opportunities, and wage levels.

Identify the effects of market forces (supply and demand) on the pricing and availability of goods and services.

Comprehend the role of government interventions (such as minimum wage legislation and price controls) in market economies.

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Definitions:

Dysfunctional Thinking

A cognitive pattern characterized by irrational, negative, and distorted perceptions of reality that can lead to emotional distress and behavioral problems.

Global Meaning

A belief system that provides an overarching framework for understanding life's events.

Universe

The totality of all space, time, matter, and energy, including planets, stars, galaxies, and all other forms of matter and energy.

Eudaemonic Well-Being

A concept of happiness derived from fulfilling one's purpose and living in accordance with one's true self, as opposed to pursuing pleasure or avoiding pain.