Power Brite Painting Company specializes in refurbishing exterior painted surfac

Question

Power Brite Painting 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: <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

1.Unskilled laborers trim all trees and bushes within two feet of the structure.

2.Skilled laborers clean the building with a high-pressure cleaning machine, using about 6 gallons of chlorine per job.

3.Unskilled laborers apply a coat of primer.

4.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 628 jobs:

<?xml:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" /?> Skilled Labor: $20 per hour

Unskilled Labor: $8 per hour

Gallons of Chlorine used: 3,768 gallons at $5.50 per gallon

Paint Primer: 7,536 gallons at $15.50 per gallon

Paint: 6,280 gallons at $16 per gallon

Depresiation of paint-spraying equipment: $600 per month depreciation

Lease of two vans: $800 per month total

Rent on storage building: $450 per month

Data on utilities for the year are as follows:

Month #of Jobs cost hours worked

JAN 42 $3950 840

FEB 37 3550 740

MAR 44 4090 880

APR 494410 980

MAY 544720 1080

JUN 62 5240 1420

JUL 71 5820 1420

AUG735890 1460

SEP 635370 1260

OCT 48 4340 960

NOV 45 4210 900

DEC 40 3830 800

Totals628 $55420 12,560

Using the high-low method, separate mixed costs into their variable and fixed components. Use total hours worked as the basis. Round your answers to two decimal places.

Variable rate:

Monthly Fixed Cost:

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.)

$ _____ per job

Project the average cost per job for next year if variable costs per job increase 20 percent. Round your answer to two decimal places.

$ _______

Why can actual utilities costs vary from the amount computed using the utilities cost formula?

Explanation / Answer

Using the high-low method, separate mixed costs into their variable and fixed components. Use total hours worked as the basis. Round your answers to two decimal places. high: AUG73 5890 1460 low: FEB 37 3550 740 slope = (5890-3550)/(1460-740)= 2340/720 = 3.25 intercept: 5890 = 1460*3.25 + intercept intercept = 1145 Variable rate: $3.25 per job Monthly Fixed Cost: $1145 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.) 55420/12560 = $4.41 $4.41 per job Project the average cost per job for next year if variable costs per job increase 20 percent. Round your answer to two decimal places. Increase = 3.25*.2 = .65 Cost = .65 + 4.41 = 5.06 $ 5.06 Why can actual utilities costs vary from the amount computed using the utilities cost formula? It varies because it is an estimate. It uses the high figure and the low figure for an estimate, which is not going to be exact.

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