Question
Xyz company is considering opening a car center service. He estimates that the following costs will be incurred during his first year of operations: rent
Xyz company is considering opening a car center service. He estimates that the following costs will be incurred during his first year of operations: rent 9200, depreciation on equipment 7k, wages 16400, motor oil $2 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3 each. He must also pay a franchise fee of $1.10 per oil change. In addition utility costs Are expected to behave in relation to the number of oil changes as follows:
Number of oil changes.
4k
6k
9k
12k
14k
Utility costs
$6k
$7300
$9600
$12600
$15k
It's anticipated that oil change services cN be provided with a filter at $25 each.
Using the high, -low method, determine variable costs per unit and total fixed costs.
Variable cost per unit $_______
Fixed cost $________
Determine the break-even point in number of oil changes and sales dollars.
Break, -even point in units_______ oil changes
Break-even point in sales $_______
Without regard to your answers in part (a) & (b) determine the oil changes required to earn net income of $20k assuming fixed costs are $32k and the contribution margin per unit is $8.
Oil changes required _____ oil changes
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