Question

Callie's Gym is a complete fitness center. Owner Callie Ducain employs various fitness trainers who are expected to staff the front desk and to teach fitness classes. While on the front desk, trainers answer the phone, handle walk-ins and show them around the gym, answer member questions about the weight machines, and do light cleaning (wiping down the equipment, vacuuming the floor). The trainers also teach fitness classes (e.g., pilates, spinning, body pump) according to their own interest and training level. The cost of the fitness trainers is $1,500 per month and $40 per class taught. Last month, 100 classes were taught.

Required:

1. Develop a cost equation for total cost of labor.

Total labor cost   =    $fill in the blank 1
+    $fill in the blank 2
per class taught
2.   What was total variable labor cost last month?
    $fill in the blank 3
3.   What was total labor cost last month?
    $fill in the blank 4
4.   What was the unit cost of labor (per class) for last month?
    $fill in the blank 5
per class
5.   What if Callie increased the number of classes offered by 50 percent?
a.   What would be the total labor cost?
    $fill in the blank 6
b.   The unit labor cost? If required, round your answer to the nearest cent.
    $fill in the blank 7
per class
c.   Why did the unit labor cost decrease?
   

Answer 1

1.

Total labour cost = fixed + VC

= 1500 + (40*100)

= 5500

2.

Total variable cost = 40*100 = 4000

3.

Total labour cost = 5500

4.

Unit cost of labour per class = total cost / no. Of class

= 5500/100 = 55

5.

a. If classes increased by 50% then new classes = 100*150% = 150

Total labour cost = fixed but+ VC

= 1500 +(40*150)

= 1500+6000

=7500

b. Unit labour cost = total cost/ total classes

= 7500/150 = 50.

c. Decrease in unit labour cost

Unit labour cost = proportion of fixed cost + variable cost per unit.

While calculating unit cost, the proportion of fixed cost = fixed cost / total no. Of units.

As we know fixed cost will remain same.

So if the units are increased then the same fixed cost will be divided in more units. So the cost per unit will decrease.

IF YOU FOUND THE ANSWER HELPFUL PLEASE UPVOTE ?.