(Flexible budget) Cheryl’s Pet Salon provides dog grooming services. Analy¬ sis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination:

Supplies: y = $0 + $4.00X Production labor: y = $500 + $7.00X Utilities: y = $350 + $5.40X Rent: y = $450 + $0.00X Advertising: y = $75 + $0.00X

a. Prepare a flexible budget at 250, 300, 350, and 400 direct labor hours.

b. Calculate a total cost per direct labor hour at each level of activity.

c. The company is normally open 350 direct labor hours per month. Each grooming job takes an average of 1.25 hours. The owner wants to earn 40 percent on her costs. What should be the average charge for each grooming, rounded to the nearest dollar?

LO1.