Bill Braddock is considering opening a fast %u2018n Clean car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay the Fast n%u2019 Clean Corporation a franchise fee of $1.10 per oil change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows:

Number of oil changes Utility cost

4,000 $ 6,000

6,000 $ 7,300

9,000 $ 9,600

12,000 $ 12,600

14,000 $ 15,000

Bill Braddock anticipates that he can provide the oil change service with a filter at $ 25 each.

(A) Using the high and low method, determine variable costs per unit and total fixed costs.

(B) Determine the break-even point in number of oil changes and sales dollars.

(C) Without regard to your answers in part A and B, determine the oil changes required to earn net income of $20,000, assuming fixed costs are $32,000 and the contribution margin per unit is $8.

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