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 $459,600 per year. ChimneySweep averages 80 service calls per month.Required: What is the average cost per cleaning service call?

Respuesta :

Answer:

$498.75

Explanation:

The computation of the average cost per cleaning service call is given below:

= (Fixed costs of labor, the company’s truck, and administrative support + number of service calls per months × total number of months in a year × variable cost per cleaning material) ÷ (number of service calls per months × total number of months in a year)

= ($459,600 + 80 × 12 × $20) ÷ (80 × 12)

= ($459,600 + $19,200) ÷ ($960)

= $498.75

The total cost of Chimney sweep services includes the fixed cost, administrative expenses, and variable costs incurred in a year. The average cost per cleaning service call is $498.75.

What is the average cost per unit?

The cost per unit is the total cost of the unit, including the maximum amount allocated to produce a set of assets divided by the total number of units produced.

It is equal to the amount of production costs divided by the number of units produced, also known as unit costs.

As per the given information,

Fixed costs is equal to $ 459,600

Variable costs is equal to  [tex]\$ 19,200 \,(\$20 \times 80\times 12)[/tex]

Number of calls is equal to [tex]960\,(80\times\,12)[/tex]

[tex]\rm\,Average\,Cost\,Per\,Cleaning\,Service = \frac{Total\,Cost}{Number\,of\,Calls\Taken} \\\\\rm\,Average\,Cost\,Per\,Cleaning\,Service = \dfrac{(\$19,200 + \$459,600)}{(80\times12)} \\\\\rm\,Average\,Cost\,Per\,Cleaning\,Service = \dfrac{\$ 478,800}{960}\\\\\rm\,Average\,Cost\,Per\,Cleaning\,Service = \$ 498.75[/tex]

Hence, the average cost per cleaning service is $ 498.75.

To learn more about the average cost per unit, refer to the link:

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