Problem
Bill Braddock is considering opening a fast 2018 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 $2.00 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%u2019 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 to behave in relation to the number of oil changes as follows:
Number of oil changes Utility cost
4,000 $ 6,000
6,000 $ 7,300
9,000 $ 9,600
12,000 $ 12,600
14,000 $ 15,000
Bill Braddock anticipates that he can provide the oil change service with a filter at $ 25 each.
(A) Using the high and low method, determine variable costs per unit and total fixed costs.
(B) Determine the break-even point in number of oil changes and sales dollars.
(C) Without regard to your answers in part A and B, determine the oil changes required to earn net income of $20,000, assuming fixed costs are $32,000 and the contribution margin per unit is $8.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.