Janice Huffman has decided to start Janice Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $600 per month. Labor costs are expected to be $50 per house cleaned and supplies are expected to cost $7 per house.
Required
a. Determine the total expected cost of equipment rental and the average expected cost of equipment rental per house cleaned, assuming that Janice Cleaning cleans 10, 20, or 30 houses during one month. Is the cost of equipment a fixed or a variable cost?
b. Determine the total expected cost of labor and the average expected cost of labor per house cleaned, assuming that Janice Cleaning cleans 10, 20, or 30 houses during one month. Is the cost of labor a fixed or a variable cost?
c. Determine the total expected cost of supplies and the average expected cost of supplies per house cleaned, assuming that Janice Cleaning cleans 10, 20, or 30 houses during one month. Is the cost of supplies a fixed or a variable cost?
d. Determine the total expected cost of cleaning houses, assuming that Janice Cleaning cleans 10, 20, or 30 houses during one month.
e. Determine the average expected cost per house, assuming that Janice Cleaning cleans 10, 20, or 30 houses during one month. Why does the cost per unit decrease as the number of houses increases?
f. If Ms. Huffman tells you that she prices her services at 30 percent above cost, would you assume that she means average or actual cost? Why?