Question

Janice Huffman has decided to start Perez 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 $65 per house cleaned and supplies are expected to cost $6 per house.

Required

Determine the total expected cost of equipment rental and the average expected cost of equipment rental per house cleaned, assuming that Perez Cleaning cleans 25, 35, or 45 houses during one month. Is the cost of equipment a fixed or a variable cost?

Determine the total expected cost of labor and the average expected cost of labor per house cleaned, assuming that Perez Cleaning cleans 25, 35, or 45 houses during one month. Is the cost of labor a fixed or a variable cost?

Determine the total expected cost of supplies and the average expected cost of supplies per house cleaned, assuming that Perez Cleaning cleans 25, 35, or 45 houses during one month. Is the cost of supplies a fixed or a variable cost?

Determine the total expected cost of cleaning houses, assuming that Perez Cleaning cleans 25, 35, or 45 houses during one month. Determine the average expected cost per house, assuming that Perez Cleaning cleans 25, 35, or 45 houses during one month.

Answer 1

1)

	25	35	45
Total expected cost	760	760	760
Average expected cost of equipment	760/25 =30.4	760/35= 21.71	760/45=16.89

The cost is fixed in nature as it remain same irrespective of number of house cleaned.

2)

	25	35	45
total expected cost of labor	65*25=1625	65*35=2275	65*45=2925
average expected cost of labor per house	1625/25=65	2275/35=65	65

The cost is variable in nature as it varies with number of house cleaned

3)

	25	35	45
Total cost	25*6=150	35*6=210	45*6=270
average expected cost of supplies per house	150/25=6	6	6

The cost is variable in nature as it varies with number of house cleaned

4)

	25	35	45
Equipment	760	760	760
Labor	1625	2275	2925
Supplies	150	210	270
Total cost	2535	3245	3955
Average cost per house	2535/25=101.4	3245/35=92.71	3955/45=87.89