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Scenario Al Kabab fine dining has chain of restaurants in Oman

Accounting

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Scenario

Al Kabab fine dining has chain of restaurants in Oman. The Company has approximately fifty restaurants across Muscat region. After the Pandemic Covid 19 maintaining the clean environment for customers is a key success factor for the restaurant Industry.

Each restaurant is cleaned every day after closing and in addition there is deep cleaning

of the restaurants 5 to 15 times in a month depending upon the business and other

factors. Deep cleaning, includes the regular deep cleaning and in addition the special

treatment to the floor and the kitchen and serving area.

The cleaning process requires two important resources labour and cleaning material.

The cost driver for both is number of times the restaurant is cleaned. Cleaning labors are permanent employees of the restaurant and cost is OMR 11000 per month regardless of number of times restaurant is cleaned. Cleaning material is a variable cost which depends upon the number of times the cleaning is done in a month.

In the month of October one of its restaurant in Muscat which has 7000 square feet of

area is cleaned 25 times, The cleaning material used was OMR 6600.

Required:

Question 1

a) You are required to prepare a table showing labour cost, cleaning material cost, total cost and cost per cleaning charges based on number of times the restaurant is cleaned,

NOTE- Use volume 4 times (between 15 to 50 in multiple of 5) cleaned.

 

b) Using the Equation of Cost Behaviour Y= a + bx, what is the total estimated cost of cleaning for November and December if the restaurant is cleaned (choose between 20 to 50 in multiple of S) times

 

c) Managing labour is an additional task for Al Kabeer company, Suppose Company is planning to hire a cleaning company and the rate charged is OMR 0.32 per square foot. The labour and cleaning material is provided by the cleaning

company. Showing the required calculation, suggest Al Kabeer company whether they should hire the cleaning company and how much they are saving/spending more if they hire.

 

d) What other factors you should consider before hiring the cleaning company if

they save the cost.