1 2 3 B F PROBLEM 4 In addition to all of their other duties, the staff of the Red Mill Inn also cleans all of the Inn's windows every two weeks. The owner is considering contracting the window cleaning to an outside service. The owner of the Inn has determined the cost of having the staff clean the windows to be as follows: 5 6 7 8 Variable costs: Labor (3 hours) Supplies Water Fixed Costs: Total cost to clean windows $ 36.00 1.40 3.60 6.00 $ 47.00 10 11 13 14 15 A calculation has determined 60% of the fixed costs to be avoidable. The offer from the window cleaning service is $39 per cleaning session. Prepare an analysis comparing the true cost of having the staff clean the windows to that of the offer from the window cleaning business. AB D F G H 1 PROBLEM 3 The staff of the Red Mill Inn launders all of the bedding and bath items for the guests every afternoon. The owner is considering having an outside service take over the laundering of these items. Information gathered in regard to the Inn's laundry costs is shown below. Laundry costs: Variable costs: Labor Supplies Water Utilities Fixed Costs: Equipment depreciation Other fixed costs Total cost per load Rate per load $ 9.00 0.40 0.50 0.25 0.40 2.00 $ 12.55 In addition to the depreciation of the laundry equipment, 15% of the Other Fixed Costs are avoidable. The owner has learned that a commercial laundry service will wash and dry bedding and bath items at a charge of $11 per load. Prepare an analysis comparing the Inn's true cost per load to the cost of using the laundry service. 18 E F G 1 5 6 A B D H PROBLEM 2 The owner of a cleaning service business paid a visit to the Red Mill Inn recently. She made a proposal to clean the rooms of the Inn at a cost of $25 per room. Currently, every afternoon after checkout time the Inn staff thoroughly cleans each room to prepare for the next guests. The owner of the Inn put together the following data to help decide whether or not to hire the cleaning service. Room cleaning costs: Cost Variable costs: per room Labor $ 18.00 Cleaning Supplies 2.25 Utilities 0.70 8 11 13 14 15 Fixed Costs: Equipment depreciation 1.80 Other fixed costs 3.75 Total cleaning cost per room $26.50 In addition to the equipment depreciation, 40% of the other fixed costs are considered avoidable if the outside servide is hired. Prepare an analysis calculating the true cost for the Inn staff to clean the rooms compared to the cost of using the outside service. 17 18 19 H PROBLEM 1 Every morning the kitchen staff bakes two dozen muffins for the guests and the gift shop. The owner is considering buying the muffins from a nearby bakery instead. The costs for the Inn staff to make two dozen muffins are as follows: 4 Ingredients Employee costs Other variable costs Fixed costs Total $ 5.50 20.00 3.50 6.00 $ 35.00 12 13 14 Muffins can be purchased from the bakery for $16.99 per dozen. Seventy-five per cent of the fixed costs will continue to be incurred even if the muffins are purchased instead of baked by the Inn. 16 REQUIRED: Prepare an analysis comparing the true cost for the Inn to bake two dozen muffins to the cost of buying them