Question

Maintaining a clean shopping environment is a key success factor for Turner?, a large grocery chain based in Minnesota. Three of the most costly resources needed to clean a supermarket are? labor, equipment, and cleaning supplies.

The cost driver for all these resources is? "number of times? cleaned." Wages for cleaning laborers? (called porters) and rent for cleaning equipment are the same regardless of the number of times the supermarket is cleaned. Supplies used for each regular daily cleaning and for each special cleaning are about the same. A typical store has 52,000 square feet. Regular cleaning is performed each day from midnight until? 7:00 AM. Special cleaning of floors and fixtures is performed in the various departments as needed. Special cleaning varies from 10 to 30 times a month depending on the amount of traffic through the store. ? Thus, the number of times a store is cleaned varies from 40 to 60 times a month.

Suppose that in one of Turner?'s stores in? Minneapolis, cleaning was performed 60 times during March. For the? month, the cost of labor and rent on equipment was $ 21,000 and cleaning supplies used cost $ 9,600. The sales budget for the next quarter? (April through? June) and better weather conditions indicate that the store will need to be cleaned 50?, 48?, and 35 times in? April, May, and June respectively.

Requirement 1. Prepare a table that shows how labor? cost, rent, cleaning supplies? cost, total? cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35?, 40?, 45?, 50?, 55?, and 60 cleanings. What is the predicted total cost of cleaning the Minneapolis store for the next? quarter? ?(Round the cost per cleaning amounts to two decimal? places.

Prepare a table that shows how labor cost, rent, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35, 40, 45, 50, 55, and 60 cleanings. What is the predicted total cost of cleaning the Minneapolis store for the next quarter?

2. Prepare a single graph that can be used to predict the fixed, variable, and total cleaning cost of the Turner store.

3. Suppose the manager of the Turner store can hire an outside cleaning company to clean the store as needed. The charge rate is $ 680 per cleaning. If the outside cleaning company is hired, Turner can lay off the workers who are now cleaning the store, eliminate the need for equipment rent, and stop purchasing cleaning supplies. Will Turner save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.

Answer 1

We identify the Fixed and the variable cost as below-

Fixed Costs- These are fixed because they are the same regardless of the number of times the supermarket is cleaned.

• Wages for cleaning laborers, say $W per month

• Rent for cleaning equipment, say $R per month

Variable Cost- Cost of Supplies

This vary and depends on the number of times it is cleaned. However, Supplies used for each regular daily cleaning and for each special cleaning are about the same and thus we assume that cost of supply per cleaning= $s

Now if n= number of times it is cleaned per month

Total Cost per month T= W + R + n x s

As per the data given for March

W+ R= 21000

n x s= 9600

n= 60

Solving, s= $160 per cleaning

(1) The table below shows how labour cost, rent, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the store is cleaned.

The predicted total cost of cleaning the Minneapolis store for the next quarter= $84280

Refer table below for calculation

2. A graph to predict the fixed, variable, and total cleaning cost of the Turner store is as below-