I have this assignment that is due in a couple hours and I am struggling to figure out the last 2 questions that I have highlighted in red. I really could use some help please.
Problem 1. Cost Behavior and Projection for a Service Business
Wabash Company specializes in refurbishing exterior painted surfaces that have been hard hit by humidity and insect debris. It uses a special technique, called pressure cleaning, before priming and painting the surface. The refurbishing process involves the following steps:
Unskilled laborers trim all trees and bushes within two feet of the structure.
Skilled laborers clean the building with a high-pressure cleaning machine, using about 6 gallons of chlorine per job.
Unskilled laborers apply a coat of primer.
Skilled laborers apply oil-based exterior paint to the entire surface.
On average, skilled laborers work 12 hours per job, and unskilled laborers work 8 hours. The refurbishing process generated the following operating results during the year on 500 jobs:
|
Skilled labor
|
$20
|
per hour
|
|
Unskilled labor
|
$8
|
per hour
|
|
Gallons of chlorine used
|
3,000
|
gallons at $5.50 per gallon
|
|
Paint primer
|
7,536
|
gallons at $15.50 per gallon
|
|
Paint
|
6,280
|
gallons at $16.00 per gallon
|
|
Depreciation of paint-spraying equipment
|
$600
|
per month depreciation
|
|
Lease of two vans
|
$800
|
per month total
|
|
Rent on storage building
|
$421
|
per month
|
Data on utilities for the year follow:
|
Month
|
Number of Jobs
|
Cost
|
Hours worked
|
|
January
|
42
|
$ 3,950
|
840
|
|
February
|
37
|
3,550
|
740
|
|
March
|
44
|
4,090
|
880
|
|
April
|
49
|
4,410
|
980
|
|
May
|
54
|
4,720
|
1,080
|
|
June
|
62
|
5,240
|
1,240
|
|
July
|
71
|
5,820
|
1,420
|
|
August
|
73
|
5,890
|
1,460
|
|
September
|
63
|
5,370
|
1,260
|
|
October
|
48
|
4,340
|
960
|
|
November
|
45
|
4,210
|
900
|
|
December
|
40
|
3,830
|
800
|
|
Totals
|
628
|
$55,420
|
12,560
|
Using the high-low method, separate mixed costs into their variable and fixed components. Use total hours worked as the basis. Round variable rate to two decimal places.
|
Variable rate
|
$ 3.25 per hour worked
|
|
Monthly fixed cost
|
$ 1145
|
3. Compute the average cost per job for the year. Round your answer to two decimal places. (Hint: Divide the total of all costs for the year by the number of jobs completed.) Use estimated hours to determine utilities costs.
4. Project the average cost per job for next year if variable costs per job increase 20 percent. Round your intermediate calculations and final answer to two decimal places.