Magic Maids is one of England’s largest commercial office cleaning services. The company has set a price of £120 for cleaning the “standard” business office. (£ = British Pound, the official currency of the United Kingdom). Magic Maids derived this price as follows:
Cleaning materials .......... £12.501
Labor (3 hours @ £15 per hour) .... 45.002
Variable overhead .......... 7.503
Fixed overhead (3 hours @ £5 per hour) . 15.004
Total cost .............. 80.00
Profit markup (50%) ......... 40.00
Price ............... £120.00
1 Magic Maids provides all of the cleaning supplies.
2 All Magic Maids employees receive a fixed salary. Magic Maids computes the “hourly” rate of £15 per hour by dividing the total salary by the total number of hours available.
3 Variable overhead consists of costs such as scrub brushes and vacuum bags that depend on the number of offices cleaned.
4 Magic Maids arrived at this estimate by dividing its total fixed overhead of £150,000 (which is comprised mainly of office rent and administrative salaries) by the total number of available labor hours, or 30,000.

A local conglomerate based in London approached Magic Maids about the possibility of cleaning 150 standard business offices next week. The conglomerate needs the work done on a rush basis due to an unexpected visit by a dignitary. Magic Maids has all of the requisite supplies in stock. It believes that it could complete 60% of the job during normal business hours. To complete the remaining 40%, however, some employees will have to work overtime; these employees receive £22.50 per hour, or 1.5 times the hourly rate, for their overtime hours.

Required:
a. Does Magic Maids’ decision deal with excess supply or excess demand?
b. What is the incremental cost associated with cleaning the 150 offices?
c. How might Magic Maids use the incremental cost number you calculated in part b for decision making?