Question

Janice Huffman has decided to start Jordan Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $760 per month. Labor costs are expected to be $80 per house cleaned and supplies are expected to cost $8 per house.

Required

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

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

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

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

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

Answer 1

a)

Number of houses cleaned	20	30	40
Total expected cost of equipment rental	760	760	760
Number of houses cleaned	20	30	40
Average expected cost of equipment rental per house cleaned	38	25.33	19

Cost of equipment a fixed.

b)

Number of houses cleaned	20	30	40
Total expected cost of labor ( No of house x 80)	1600	2400	3200
Average expected cost of labor per house cleaned,	80	80	80

Cost of labor is a variable cost.

c)

Number of houses cleaned	20	30	40
Total expected cost of supplies (No of house x 8)	160	240	320
Average expected cost of supplies per house cleaned	8	8	8

Cost of labor is a variable cost.

d)

Number of houses cleaned	20	30	40
Total expected cost of equipment rental	760	760	760
Total expected cost of labor (No of house x 80)	1600	2400	3200
Total expected cost of supplies (No of house x 8)	160	240	320
Total expected cost of cleaning houses	2520	3400	4280

e)

Number of houses cleaned	20	30	40
Total expected cost of cleaning houses	2520	3400	4280
Average expected cost per house ( Total / No of house)	126	113.33	107

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