Exercise 22-8 Rensing Groomers is in the dog-grooming business. Its operating co
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Exercise 22-8 Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following formulas: Grooming supplies (variable) Direct labor (variable) Overhead (mixed) y$0 S14x $10,000 + $1x y = Milo, the owner, has determined that direct labor is the cost driver for all three categories of costs Prepare a flexible budget for activity levels of 550, 600, and 700 direct labor hours. (List variable costs before fixed costs.) RENSING GROOMERS Flexible Budget Calculate the total cost per direct labor hour at each of the activity levels specified in part (a). (Round answers to 2 decimal places, e.g. 10.25.) Activity level 1 s Activity level 2 Activity level 3 The groomers at Rensing normally work a total of 650 direct labor hours during each month. Each grooming job normally takes a groomer 1.30 hours. Milo wants to earn a profit equal to 40% of the costs incurred. Determine what he should charge each pet owner or groomir Ro n answerto 2 decima paces eg. 10.25 Charge per clientExplanation / Answer
FLEXIBLE BUDGET 550 Hours 600 Hours 700 Hours Grooming Supplies (Y =0+5X)(here X is Labour hours) 2750 3000 3500 Direct labour (Y=0+14X) 7700 8400 9800 Overheads (Y=10000+1X) 10550 10600 10700 Total Cost ofActivity 21000 22000 24000 Number of Labour hours 550 600 700 Cost per hour 38.18 36.67 34.29 Activity Level 1(550 hours) 38.18 Activity Level 2(600 hours) 36.67 Activity Level 3(700 hours) 34.29 Budget for 650 Hours $ Grooming Supplies (Y =0+5X)(here X is Labour hours) 3250 Direct labour (Y=0+14X) 9100 Overheads (Y=10000+1X) 10650 Total Cost ofActivity 23000 Number of Labour hours 650 Cost per hour 35.38 Charge for customer(Take 1.30 hour per customer) Cost per hour $ 35.38 per hour Cost for 1.30 hour(35.38*1.30) 45.99 Add: Profit @40% of cost i.e. 45.994 18.4 Charge for customer for Job 64.39
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