HairPort Company offers a variety of hair treatment services. The marketing strategy of the company is fast service with high quality. The company operates all of its outlets in major shopping malls. To speed up its services, there are three outlets in each mall-where each outlet offers specialized hair treatment. One of the outlets offers shampooing and hair colouring. This outlet expects to service 5,000 clients for the coming year. The expected costs for servicing this number of clients are give below:
Direct materials $25,000
Direct labour 40,000
Overhead:
Supplies (V) 3,000
Rent (F) 15,000
Indirect labour (V) 6,000
Power (V) 1,000
Assume that all the individual cost items are either strictly fixed or strictly variable with respect to clients serviced.
Required:
1. Prepare a cost formula for the following costs:
a. Direct materials
b. Direct labour
c. Variable overhead
d. Fixed overhead
e. Total costs