Your firm designs training materials for computer training classes, and you have

Your firm designs training materials for computer training classes, and you have just received a request to bid on a contract to produce a complete set of training manuals for an 10-session class. From previous experience, you know that your firm follows an 85% learning rate. For this contract, it appears that the effort will be substantial, running 60 hours for the first session. Your firm bills at the rate of $200/hour and the overhead is expected to run a fixed $600 per session. If your profit markup is 20%, what will be the Total Price, the Per Session Price, and at what session will you break even?
Answer the following three questions:
1. What is the Total Price? This is what you would charge the customer so that you can have your profit markup of 20% over all of your costs. To calculate this, (i) Figure out the number of hours required per session based on the learning
curve. Review the formula we covered in this week’s reading.
(ii) Calculate Session Hours * Hourly Rate for each session.
(iii) For each session, add the overhead cost to the session cost from (ii).
(iv) Find the SUM of all costs from (iii). This will be the total cost.
(v) Now, you need to add the Markup to the total cost in (iv). This will be your Total Price.
2. What is the Per Session Price? This is the revenue that the customer pays you each time you complete a session. It is calculated by dividing the Total Price by the number of sessions.
3. What is the Break Even Point? At the beginning, your cost per session is more than your revenue per session. (Cost is without Markup; Revenue is with the markup) Gradually, your cumulative revenue matches the cumulative cost, and eventually exceeds it so that you can end up with the desired profit. The break-even point is the session at which, for the first time, your revenue exceeds your cost.