Luster Auto, Inc., specializes in “detailing” automobile exteriors—that is, revitalizing them so the cars look as if they had just rolled off the showroom floor. The company charges $100 for a full exterior detailing. It has just completed its first year of business and has asked its accountants to analyze the operating results. Management wants costs divided into variable, fixed, and mixed components and would like them projected for the coming year. Anticipated volume for next year is 1,100 jobs. The process used to detail a car’s exterior is as follows:

1. One $20-per-hour employee spends 20 minutes cleaning the car’s exterior.

2. One can per car of Bugg-Off, a cleaning compound, is used on trouble spots.

3. A chemical compound called Buff Glow is used to remove oxidants from the paint surface and restore the natural oils to the paint.

4. Poly Wax is applied by hand, allowed to sit for 10 minutes, and then buffed off.

5. The final step is an inspection to see that all wax and debris have been removed.

On average, two hours are spent on each car, including cleaning time and drying time for the wax. Operating information for Luster Auto’s first year is as follows:

Number of automobiles detailed ....840

Labor per auto ...........2 hours at $20.00 per hour

Containers of Bugg-Off consumed ...840 at $3.50 per can

Pounds of Buff Glow consumed ....105 pounds at $32.00 per pound

Pounds of Poly Wax consumed .....210 pounds at $8.00 per pound

Rent ...............$1,400.00 per month

During the year, utilities costs ranged from $800 for 40 jobs in March to $1,801 for 110 jobs in August.

Required

1. Classify the costs as variable, fixed, or mixed.

2. Using the high-low method, separate the mixed costs into their variable and fixed components. Use number of jobs as the basis.

3. Project the same costs for next year, assuming that the anticipated increase in activity will occur and that fixed costs will remain constant.

4. Compute the unit cost per job for next year.

5. Manager Insight: Given your answer to 4, should the price remain at $100 per job?