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ChimneySweep provides cleaning services for residential chimneys and fireplaces
ChimneySweep provides cleaning services for residential chimneys and fireplaces. The cleaning service requires $20 in variable costs for cleaning materials. The fixed costs of labor, the company's truck, and administrative support are $349,200 per year. ChimneySweep averages 200 service calls per month.
Required: What is the average cost per cleaning service call? (Round your answer to 2 decimal places.)
Expert Solution
Answer:
The average cost per cleaning service call is $165.50
Explanation:
ChimneySweep Provided that:
- Variable cost per cleaning service = $20
- Annual Fixed costs = $349,200
- Average service calls per month = 200 service calls
- Service calls per annum = 200 * 12 months = 2,400 calls
Formula:
Average total cost = Variable cost + Fixed cost
Average total cost = $48,000 + $349,200 = $397,200
Average cost per unit = Average total cost / service calls per year
Average cost per unit = $397,200 / 2,400 = $165.50
Note:
Total Variable cost = Variable cost per cleaning service * Average service calls per month * 12 months
Total Variable cost = $20 * 200 * 12 = $48,000
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