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Introduction to Management
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Solutions Manual
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CHAPTER 2
COVERAGE OF LEARNING OBJECTIVES
1. The cost driver for both resources is square feet cleaned. Labor cost is a fixed-cost
resource, and cleaning supplies is a variable cost. Costs for cleaning between 4 and 8
times a month are:
Number of
times plant Square Feet Cleaning Supplies Cost per
is cleaned Cleaned Labor Cost Cost** Total cost Square Foot
4 160,000* $24,000 $ 9,600*** $33,600 $0.210
5 200,000 24,000 12,000 36,000 0.180
6 240,000 24,000 14,400 38,400 0.160
7 280,000 24,000 16,800 40,800 0.146
8 320,000 24,000 19,200 43,200 0.135
* 4 × 40,000 square feet
** Cleaning supplies cost per square feet cleaned = $6,000 ÷ 100,000 = $0.06
*** $0.06 per square foot × 160,000
The predicted total cost to clean the plant during the next quarter is the sum of the total
costs for monthly cleanings of 5, 6, and 8 times. This is
2. If Boeing hires the outside cleaning company, all its cleaning costs will be variable at
a rate of $5,900 per cleaning. The cost driver will be “number of times cleaned.” The
predicted cost to clean a total of 5 + 6 + 8 = 19 times is 19 × $5,900 = $112,100. Thus,
Boeing will save by hiring the outside cleaning company. The table and chart on the next
page show the total costs for the two alternatives. The cost driver for the outsource
alternative is different than the cost driver if Boeing cleans the plant with its own
employees. If Boeing expects average “times cleaned” to be 7 or more, it would save by
cleaning with its own employees.
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