Exercise 22-8

Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following formulas:

Grooming supplies (variable)		y	=	$0 + $4x
Direct labor (variable)		y	=	$0 + $12x
Overhead (mixed)		y	=	$10,700 + $1x

Milo, the owner, has determined that direct labor is the cost driver for all three categories of costs.

Prepare a flexible budget for activity levels of 528, 563, and 663 direct labor hours. (List variable costs before fixed costs.)

RENSING GROOMERS Flexible Budget
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs :
Activity Level Direct Labor Direct Labor Hours Fixed Costs Grooming Supplies Overhead Total Costs Total Fixed Costs Total Variable Costs Variable Costs	$	$	$
Activity Level Direct Labor Direct Labor Hours Fixed Costs Grooming Supplies Overhead Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity Level Direct Labor Direct Labor Hours Fixed Costs Grooming Supplies Overhead Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs :
Activity Level Direct Labor Direct Labor Hours Fixed Costs Grooming Supplies Overhead Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity Level Direct Labor Direct Labor Hours Fixed Costs Grooming Supplies Overhead Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGrooming SuppliesOverheadTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs	$	$	$

LINK TO TEXT

Calculate the total cost per direct labor hour at each of the activity levels specified in part (a). (Round answers to 2 decimal places, e.g. 10.25.)

Activity level 1		$
Activity level 2		$
Activity level 3		$

LINK TO TEXT

The groomers at Rensing normally work a total of 638 direct labor hours during each month. Each grooming job normally takes a groomer 1.30 hours. Milo wants to earn a profit equal to 35% of the costs incurred. Determine what he should charge each pet owner for grooming. (Round answer to 2 decimal places, e.g. 10.25.)

Charge per client

$