Cost-plus, time and materials, ethics. R & C Mechanical sells and services plumbing, heating, and air conditioning systems. R & C’s cost accounting system tracks two cost categories: direct labor and direct materials. R & C uses a time-and-materials pricing system, with direct labor marked up 100% and direct materials marked up 60% to recover indirect costs of support staff, support materials, and shared equipment and tools, and to earn a profit. R & C technician Greg Garrison is called to the home of Ashley Briggs on a particularly hot summer day to investigate her broken central air conditioning system. He considers two options: replace the compressor or repair it. The cost information available to Garrison follows:



Required
1. If Garrison presents Briggs with the replace or repair options, what price would he quote for each?
2. If the two options were equally effective for the three years that Briggs intends to live in the home, which option would she choose?
3. If Garrison’s objective is to maximize profits, which option would he recommend to Briggs? What would be the ethical course ofaction?