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Exercise 24-8 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 = y y = $0 + $3x $0 + $13x $10,500+ $2x Milo, the owner, has determined that direct labor is the cost driver for all three categories of costs
Expert Answer
| Rensing Groomers | |||||
| Monthly Flexible Manufacturing Budget | |||||
| For the Year 2017 | |||||
| Direct Labor Levels | 510 | 590 | 700 | ||
| Variable Costs: | |||||
| Grooming Supplies | 1530 | 1770 | 2100 | ||
| Direct Labor | 6630 | 7670 | 9100 | ||
| Overhead-Variable | 1020 | 1180 | 1400 | ||
| Total Variable Cost | 9180 | 10620 | 12600 | ||
| Fixed Costs: | |||||
| Overhead-Fixed | 10500 | 10500 | 10500 | ||
| Total Fixed Cost | 10500 | 10500 | 10500 | ||
| Total Expenses | 19680 | 21120 | 23100 | ||
| Total Cost Per Direct Labor Hour | 38.59 | 35.80 | 33.00 | ||
| (Total Expenses / Direct Labor Level) | |||||
| Calculation of Price to be charged: | |||||
| Particulars | 650 Hours | ||||
| Grooming Supplies | 1950 | ||||
| Direct Labor | 8450 | ||||
| Overhead-Variable | 1300 | ||||
| Overhead-Fixed | 10500 | ||||
| Total Cost | 22200 | ||||
| Add: Profit Margin @45% of Cost | 9990 | ||||
| Total Price | 32190 | ||||
| No of Labor Hours Worked | 650 | ||||
| Price per Labor Hour | 49.52 | ||||
| Time Spent on Each Job | 1.3 | ||||
| Price to be charged | 64.38 | ||||
