Question

Maintaining a clean working environment is important to Life is Great​, an industrial parts manufacturer. Cleaning the plant is the responsibility of the maintenance department. The 80,000 square foot plant is thoroughly cleaned from four to eight times a month depending on the level and stage of production. For the most recent​ month, March, the plant was cleaned four times. The production schedule for the next quarter​ (April through​ June) indicates that the plant will need to be cleaned​ five, six, and eight times respectively. Two of the resources needed to clean the plant are labor and cleaning supplies. The cost driver for both resources is number of times the plant is cleaned. Plant cleaning laborers are​ full-time employees who are paid the same wages regardless of the number of times the plant is cleaned. Cleaning supplies is a variable cost. The March cost of labor was $ 27,000 and cleaning supplies used cost $ 9,600.

Requirement 2. Suppose Life is Great can hire an outside cleaning company to clean the plant as needed. The charge rate for cleaning is $5,900 per plant cleaning. If the outside cleaning company is​ hired, Life is Great can lay off the workers who are now cleaning the plant and will spend nothing for cleaning supplies. Will Life is Great save money with the outside cleaning company over the next​ quarter? Prepare a schedule that supports your answer.

Begin by preparing a schedule showing the cost of outsourcing the plant cleaning each month and in total for the next quarter and whether those costs result in a cost savings or excess cost to Life is Great.

​ (Use a minus sign or parentheses to show an excess cost​ amount.)

Answer 1