Mark Osmond asks you to analyze the operating cost of his lawn services business. He has bought
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a. Determine the total cost of equipment depreciation and the average cost of equipment depreciation per lawn service, assuming that Mr. Osmond provides 20, 25, or 30 lawn services during one month. Is the cost of equipment a fixed or a variable cost?
b. Determine the total expected cost of labor and the average expected cost of labor per lawn service, assuming that Mr. Osmond provides 20, 25, or 30 lawn services during one month. Is the cost of labor a fixed or a variable cost?
c. Determine the total expected cost of materials and the average expected cost of materials per lawn service, assuming that Mr. Osmond provides 20, 25, or 30 lawn services during one month. Is the cost of fertilizer, pesticide, and supplies a fixed or a variable cost?
d. Determine the total expected cost per lawn service, assuming that Mr. Osmond provides 20, 25, or 30 lawn services during one month.
e. Determine the average expected cost per lawn service, assuming that Mr. Osmond provides 20, 25, or 30 lawn services during one month. Why does the cost per unit decrease as the number of lawn services increases?
f. If Mr. Osmond tells you that he prices his services at 30 percent above cost, would you assume that he means average or actual cost? Why?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
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