Outback Steakhouse has 970 restaurants offering steak, chicken and seafood served in an Australian-themed atmosphere. Maintaining a clean environment for customers is a key success factor at Outback. Each restaurant is cleaned regularly after closing. In addition to regular cleaning, from 5 to 20 times a month, depending on various factors including the amount of business, a special treatment is given to the floors consisting of breaking down the old wax and rewaxing. So the total number of times a restaurant is cleaned varies from 35 to 50 times a month.

The two most costly resources needed to clean an Outback restaurant are labour and supplies. The cost driver for both resources is square metres cleaned. Cleaning labourers are paid the same wages regardless of the number of times a restaurant is cleaned. Cleaning supplies is a variable cost. The cost of supplies used per square metre for regular and special cleaning is about the same. Suppose one of the local Outback restaurants in Milan has 5,000 square metres. In October, the restaurant was cleaned 35 times. The cost of cleaning labour was €30,000 for October and cleaning supplies cost €10,500. The months of November and December are typically much busier, so the restaurant manager expects to clean 45 times and 50 times in November and December, respectively.

1. Prepare a table that shows how labour cost, cleaning supplies cost, total cost and total cost per square meters cleaned changes in response to square meters cleaned. Use volumes of 35, 40, 45 and 50 times cleaned. What is the predicted total cost of cleaning for November and December?

2. Suppose Outback can hire an outside cleaning company to clean the restaurant as needed. The charge rate for cleaning is €.20 per square metre. If the outside cleaning company is hired, Outback can lay off the workers who are now cleaning and will spend nothing on cleaning supplies. Will Outback save money with the outside cleaning company over the next two months? Prepare a schedule that supports your answer. What information would you need to make a recommendation about hiring the outside cleaning company on a permanent basis?