Maria Chavez owns a catering company that serves food and beverages at parties a
ID: 2397385 • Letter: M
Question
Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez's business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times. One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and has estimated the cost per guest as follows Food and beverages Labor (0.5 hour e ?10.00 /hr.) Overhead (0.5 hour $18.66/hr.) Total cost per guest 17.00 5.00 9.33 $ 31.3.3 The standard cocktail party lasts three hours and Chavez hires one worker for every six guests so that works out to one-half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work when bidding on cocktail parties, Chavez adds a 13% markup to yield a price of about $40 per guest. She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of overhead cost. The $18.66 overhead cost per labor hour was determined by dividing total overhead expenses for the last 12 months by total labor- hours for the same period. Monthly data concerning overhead costs and labor-hours follow: Overhead Expenses 50,000 54,000 55,000 59,000 62,000 66,000 69,000 72,000 70,000 Labor- Month January February March April May June Hours 3,000 2,100 2,300 3,500 3,800 4,800 5,800 6,800 6,300 Ll August SeptemberExplanation / Answer
Answers
n
x
y
X2
xy
January
3000
50000
9000000
150000000
February
2100
54000
4410000
113400000
March
2300
55000
5290000
126500000
April
3500
59000
12250000
206500000
May
3800
62000
14440000
235600000
June
4800
66000
23040000
316800000
July
5800
69000
33640000
400200000
August
6800
72000
46240000
489600000
September
6300
70000
39690000
441000000
October
3800
63000
14440000
239400000
November
3400
59000
11560000
200600000
December
5800
67000
33640000
388600000
12
51400
$ 746,000.00
2.48E+08
3308200000
n
12
?x
51400
?y
746000
?x2
247640000
?xy
3308200000
Unit Variable Cost = b = [ (n ?xy) - (?x. ?y) ] / [(n?x2 ) – (?x)2]
[ (n ?xy) - (?x. ?y) ] = N [Numerator]
[(n?x2 ) – (?x)2] = D [Denominator]
----Solving for value of ‘b’ = Variable cost per hour
N [Numerator]
=
(n
x
?xy)
-
(?x
x
?y)
N [Numerator]
=
12
x
3308200000
-
51400
x
746000
N [Numerator]
=
39698400000
-
38344400000
N [Numerator]
=
1354000000
D [Denominator]
=
(n
x
?x2)
-
(?x)2
D [Denominator]
=
12
x
247640000
-
2641960000
D [Denominator]
=
2971680000
-
2641960000
D [Denominator]
=
329720000
b
=
N
/
D
b
=
1.354E+09
/
329720000
b
=
4.106514618
-------HENCE, Variable cost ‘b’ = $ 4.11 per labor hours
Total Fixed Cost = a = [ (?y) – (b?x) ] / n
[ (?y) – (b?x) ] = N1 [Numerator]
---Solving value of ‘a’: Fixed Cost
N1 [Numerator]
=
?y
-
(b
x
?x)
N1 [Numerator]
=
746000
-
4.11
x
51400
N1 [Numerator]
=
746000
-
211254
N1 [Numerator]
=
534746
a
=
N1
/
n
a
=
534746
/
12
a
=
44562
-------HENCE, Fixed cost ‘a’ = $ 44,562.00
Y [total cost] = a [fixed cost] + b [variable cost per unit] X
Y = $ 44,562 + $ 4.11 X
n
x
y
X2
xy
January
3000
50000
9000000
150000000
February
2100
54000
4410000
113400000
March
2300
55000
5290000
126500000
April
3500
59000
12250000
206500000
May
3800
62000
14440000
235600000
June
4800
66000
23040000
316800000
July
5800
69000
33640000
400200000
August
6800
72000
46240000
489600000
September
6300
70000
39690000
441000000
October
3800
63000
14440000
239400000
November
3400
59000
11560000
200600000
December
5800
67000
33640000
388600000
12
51400
$ 746,000.00
2.48E+08
3308200000