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Please solve John is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first
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John is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Fast ' n Clean Corporation a franchise fee of $1.10 per oil change since he will operate the business as a franchise. In addition, utility costs are expected vary with the quantity of oil changes as follows: John anticipates that he can provide the oil change service with a filter at $26.88 each. Using the high-low method, determine variable costs per unit and total fixed costs. (Round variable cost to 2 decimal places, e.g. 52.75.) Variablecost $ per unit Fixed cost Determine the break-even sales quantity of oil changes and sales dollars. (Round Contribution mar? ratio to 2 decimal places, e.g. 57.20\%. Round final answers to 0 decimal places, e.g. 5720) Break-even oil changes in units Break-even sales in dollars Without regard to your answers in parts (a) and (b), determine the oil changes required to earn a net income of $22,000, assuming fixed costs are $34,000 and the contribution margin per unit is $8. Oil changes required Step by Step Solution
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