Maintaining a clean working environment is important to Napco, an industrial parts manufacturer. Cleaning the plant is the responsibility of the maintenance department. The 50,000 square foot plant is thoroughly cleaned from four to eight times a month depending on the level and stage of production. For the most recent month, March, the plant was cleaned four times. The production schedule for the next quarter (April through June) indicates that the plant will need to be cleaned five, six, and eight times respectively. Two of the resources needed to clean the plant are labor and cleaning supplies. The cost driver for both resources is number of times the plant is cleaned. Plant cleaning laborers are full-time employees who are paid the same wages regardless of the number of times the plant is cleaned. Cleaning supplies is a variable cost. The March cost of labor was $ 21,000 and cleaning supplies used cost $8,000. 1. Prepare a table that shows how labor cost, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the plant is cleaned. What is the predicted total cost of plant cleaning for the next quarter? 2. Suppose Napco can hire an outside cleaning company to clean the plant as needed. The charge rate for cleaning is $5,700 per plant cleaning. If the outside cleaning company is hired, Napco can lay off the workers who are now cleaning the plant and will spend nothing for cleaning supplies. Will Napco save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.
Maintaining a clean working environment is important to Napco, an industrial parts manufacturer. Cleaning the plant is the responsibility of the maintenance department. The 50,000 square foot plant is thoroughly cleaned from four to eight times a month depending on the level and stage of production. For the most recent month, March, the plant was cleaned four times. The production schedule for the next quarter (April through June) indicates that the plant will need to be cleaned five, six, and eight times respectively. Two of the resources needed to clean the plant are labor and cleaning supplies. The cost driver for both resources is number of times the plant is cleaned. Plant cleaning laborers are full-time employees who are paid the same wages regardless of the number of times the plant is cleaned. Cleaning supplies is a variable cost. The March cost of labor was $ 21,000 and cleaning supplies used cost $8,000. 1. Prepare a table that shows how labor cost, cleaning supplies cost, total cost, and total cost per cleaning changes in response to the number of times the plant is cleaned. What is the predicted total cost of plant cleaning for the next quarter? 2. Suppose Napco can hire an outside cleaning company to clean the plant as needed. The charge rate for cleaning is $5,700 per plant cleaning. If the outside cleaning company is hired, Napco can lay off the workers who are now cleaning the plant and will spend nothing for cleaning supplies. Will Napco save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Maintaining a clean working environment is important to Napco, an industrial parts manufacturer. Cleaning the
plant is the responsibility of the maintenance department. The 50,000 square foot plant is thoroughly cleaned
from four to eight times a month depending on the level and stage of production. For the most recent month,
March, the plant was cleaned four times. The production schedule for the next quarter (April through June)
indicates that the plant will need to be cleaned five, six, and eight times respectively. Two of the resources
needed to clean the plant are labor and cleaning supplies. The cost driver for both resources is number of times
the plant is cleaned. Plant cleaning laborers are full-time employees who are paid the same wages regardless of
the number of times the plant is cleaned. Cleaning supplies is a variable cost. The March cost of labor was $
21,000 and cleaning supplies used cost $8,000. 1. Prepare a table that shows how labor cost, cleaning supplies
cost, total cost, and total cost per cleaning changes in response to the number of times the plant is cleaned.
What is the predicted total cost of plant cleaning for the next quarter? 2. Suppose Napco can hire an outside
cleaning company to clean the plant as needed. The charge rate for cleaning is $5,700 per plant cleaning. If the
outside cleaning company is hired, Napco can lay off the workers who are now cleaning the plant and will spend
nothing for cleaning supplies. Will Napco save money with the outside cleaning company over the next quarter?
Prepare a schedule that supports your answer.
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