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What should be the average charge per customer

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Question - Tom's Shoes Repair provides a variety of shoe and repair service. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination:

Supplies: y =$0 + $4.00x

Production supervision and direct labor: y = $500 + $7.00x

Utilities: y = $350 + $5.40x

Rent: y = $450 + $0.00x

Advertising: y = $75 + $0.00x

a) Prepare a flexible budget at 250, 300, and,400 direct labor hours.

b) Calculate a total cost per direct labor hour at each level of activity.

c) Tom usually incurs 350 direct labor hours per month. The average shoe repair requires 1.25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom's objective?

Reference no: EM131782788

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