00 CASE 5A-12 Analysis of Mixed Costs In a Pricing Decision LO5-11- Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez's business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times. One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows: Food and beverages. Labor (0.5 hrs. @$10.00/hr.). Overhead (0.5 hrs. @$13.98/hr.). Total cost per guest... $15.00 5.00 6.99 $26.99 The standard cocktail party lasts three hours and Chavez hires one worker for every six guests, so that works out to one-half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work. When bidding on cocktail parties. Chavez adds a 15% markup to yield a price of about $31 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The $13.98 overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 months by total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours follow: Month January February March April May June July Labor- Overhead Hours Expenses 2.500 $ 55,000 2.800 59.000 3,000 60,000 4,200 64,000 7,000 We've updated our read aloud feature! Give it a try here 1,000 Q Aa dep 0 MacBook Air