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Estimate lorenzo total costs

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Reference no: EM132562567

Account analysis method. Lorenzo operates a car wash. Incoming cars are put on an automatic conveyor belt. Cars are washed as the conveyor belt carries them from the start station to the finish station. After a car moves off the conveyor belt, it is dried manually. Workers then clean and vacuum the inside of the car. Lorenzo serviced 80,000 cars in 2012. Lorenzo reports the following costs for 2012:

Account Description Costs

Car wash labor $260,000

Soap, cloth, and supplies 42,000

Water 38,000

Electric power to move conveyor belt 72,000

Depreciation 64,000 Salaries 46,000

Required

Question 1. Classify each account as variable or fixed with respect to the number of cars washed. Explain.

Question 2. Suppose Lorenzo washed 90,000 cars in 2012. Use the cost classification you developed in requirement 1 to estimate Lorenzo's total costs in 2012. Depreciation is computed on a straight line basis.

Reference no: EM132562567

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