University surcharge Utilities Wildcat Lair costs: Fixed Variable Purchases of prepared food $23,892 Serving personnel$28,408 Cashier 6,000 Administration 10,860 University surcharge 7,240 Utilities 1,800 Totals$47,068 $31,132 Variable cost = $31,132 ÷ $72,400= 0.43= 43%Combining fixed and variable costs, the cost function is:Cost Formula: Total Cost = $47,068+ 43%× Total Revenue Total Revenue is the most likely cost driver for both variable costs. Food costs are likely to vary proportionately with sales, and the University surcharge is specifically based on sales.Problem 2.46 (Part Level Submission)Cost Formula: Total Cost = $47,068 + 43% × $84,000= $83,188 Profit = $84,000 − $83,188= $812 Problem 2.46 (Essay)The university’s Wildcat Lair has been reporting losses in past months. In July, for example, the loss was $5,000:Revenue$70,000 Expenses Purchases of prepared food $21,000 Serving personnel 30,000 Cashier 5,500 Administration 10,000 Fixed N/A Variable Total Revenue Fixed N/A
University surcharge 7,000 Utilities 1,500 75,000 Loss$ (5,000)The Lair purchases prepared food directly from University Food Services. The charge varies proportionately with the number and kind of meals served. Personnel who are paid by the Lair serve the food, tend the cash register, bus and clean tables, and wash dishes. The staffing levels in the Lair rarely change; the existing staff can usually handle daily fluctuations in volume. Administrative costs are primarily the salaries of the Lair manager and her office staff. The university charges the Lair a surcharge of 10% of its revenue. Utility costs are the costs of cooling, heating, and lighting the Lair
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