Question

Maintaining a clean shopping environment is a key success factor for Super Valu, a large grocery chain based in Minnesota. Three of the most costly resources needed to clean a supermarket are labor, equipment, and cleaning supplies. The cost driver for all these resources is “number of times cleaned.”
Wages for cleaning laborers (called porters) and rent for cleaning equipment are the same regardless of the number of times the supermarket is cleaned. Supplies used for each regular daily cleaning and for each special cleaning are about the same.
A typical store has 48,000 square feet. Regular cleaning is performed each day from midnight until 7:00 am. Special cleaning of floors and fixtures is performed in the various departments as needed. Special cleaning varies from 10 to 30 times a month depending on the amount of traffic through the store. Thus, the number of times a store is cleaned varies from 40 to 60 times a month.
Suppose that in one of Super Valu’s stores in Minneapolis, cleaning was performed 60 times during March. For the month, the cost of labor and rent on equipment was $21,000 and cleaning supplies used cost $12,000. The sales budget for the next quarter (April through June) and better weather conditions indicate that the store will need to be cleaned 50, 46, and 35 times in April, May, and June respectively.
1. Prepare a table that shows how labor cost, rent, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35, 40, 45, 50, 55, and 60 cleanings. What is the predicted total cost of cleaning the Minneapolis store for the next quarter?
2. Prepare a single graph that can be used to predict the fixed, variable, and total cleaning cost of the Super Valu store.
3. Suppose the manager of the Super Valu store can hire an outside cleaning company to clean the store as needed. The charge rate is $720 per cleaning. If the outside cleaning company is hired, Super Valu can lay off the workers who are now cleaning the store, eliminate the need for equipment rent, and stop purchasing cleaning supplies. Will Super Valu save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.



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  • CreatedNovember 19, 2014
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