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Question - Variable Cost Analysis - Zero Time Oil Change has been in business for six months. The company pays $0.75 per quart for the oil it uses in servicing cars. Each job requires an average of 4 quarts of oil. The company estimates that in the next three months, it will service 250, 280, and 360 cars.
Required -
1. Compute the cost of oil for each of the three months and the total cost for all three months.
2. Complete the following sentences by choosing the words that best describe the cost behavior at Zero Time:
a. Cost per unit (increased, decreased, remained constant).
b. Total variable cost per month (increased, decreased) as the quantity of oil used (increased, decreased).
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