Question

Janice Huffman has decided to start Rundle Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $710 per month. Labor costs are expected to be $50 per house cleaned and supplies are expected to cost $7 per house.

Required

a.Determine the total expected cost of equipment rental and the average expected cost of equipment rental per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of equipment a fixed or a variable cost?

b.Determine the total expected cost of labor and the average expected cost of labor per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of labor a fixed or a variable cost?

c.Determine the total expected cost of supplies and the average expected cost of supplies per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of supplies a fixed or a variable cost?

d.Determine the total expected cost of cleaning houses, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month.

e.Determine the average expected cost per house, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month.

Answer 1

Question A

Particulars	Case 1	Case 2	Case 3
Total Expected Cost of Equipment Rental	710	710	710
÷ Number of Houses Cleaned	20	30	40
Average Expected Cost of Equipment Rental per House	35.50	23.67	17.75

Cost of Equipment Rental is Fixed Cost

Question B

Particulars	Amount	Amount	Amount
Labour Cost per House	50	50	50
* Number of Houses Cleaned	20	30	40
Total Labor Cost for Houses Cleaned	1,000	1,500	2,000

Particulars	For 20 Houses	For 30 House	For 40 Houses
Total Labor Costs	1,000	1,500	2,000
÷ Number of Houses Cleaned	20	30	40
Average Expected Labour Cost per House Cleaned	50	50	50

Labour Cost is Variable Cost.

Question 3

Particulars	Amount	Amount	Amount
Supplies Cost per House	7	7	7
* Number of Houses Cleaned	20	30	40
Total Supplies Cost	140	210	280

Particulars	For 20 Houses	For 30 Houses	For 40 Houses
Total Supplies Cost	140	210	280
÷ Number of Houses Cleaned	20	30	40
Average Supplies Cost per House	7	7	7

Supplies Cost is a Variable Costs.

Question 4

Particulars	For 20 Houses	For 30 Hiuses	For 40 Houses
Total Equipment Rental Cost	710	710	710
Add: Total Labor Cost	1,000	1,500	2,000
Add: Total Supplies Cost	140	210	280
Total Costs for Houses Cleaned	1,850	2,420	2,990

Question 5

Particulars	For 20 Houses	For 30 Houses	For 40 Houses
Total Cost of Houses Cleaned	1,850	2,420	2,990
÷ Number of Houses Cleaned	20	30	40
Average Cost per House Cleaned	92.5	80.67	74.75