Kara Buchanan has decided to start Kara Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $900 per month. Labor costs are expected to be $60 per house cleaned and supplies are expected to cost $5 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 Kara 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 Kara 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 Kara 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 Kara Cleaning cleans 10, 20, or 30 houses during one month.

e. Determine the average expected cost per house, assuming that Kara 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. Buchanan tells you that she prices her services at 25 percent above cost, would you assume that she means average or actual cost? Why?