Fixed and Variable Cost Behaviour - Inhouse Cleaning

Plant Size in Square feet Cost of cleaning supp

25,000 $

Clearning Schedule of Plant based on Level and stage of P

Month No. of Times Square feet Cleaned Labour Cost

June 4 100,000 $ 15,000

July 5 125,000 $ 15,000
August 6 150,000 $ 15,000
September 8 200,000 $ 15,000

Predicted total cleaning cost for the next quarter $ 65,188

Cost schedule for Oursourcing the plant cleaning ac

Fee per plant cleaning $ 3,500

Month No. of Times Square feet Cleaned Plant cleaning fee

June 4 100,000 $ 14,000

July 5 125,000 $ 17,500
August 6 150,000 $ 21,000
September 8 200,000 $ 28,000

Predicted total cleaning cost for the next quarter $ 66,500

Increased cost due to outsourcing over the next quarter $ 1,313
Maple will lose money by outsourcing the cleaning activity to an outside company to the tally of $1,313 over t

$30,000

$25,000
Total Cost

$20,000

$15,000

$10,000

$5,000
 $15,000

$10,000

$5,000

$-
100,000 125,000 150,000
Square feet cleaned

The graph shows that at around 155,000 squre feet level of activity, Maple will be indifferent between outsourci
inhouse cleaning as total costs at this point remain the same whichever option is employ
nhouse Cleaning activity vs Outsourcing
Cost of cleaning supplies per Square foot
0.04250

vel and stage of Production

Total Cost
Cost of Supplies Total cost per Square
feet cleaned

$ 4,250 $ 19,250 $ 0.1925

$ 5,313 $ 20,313 $ 0.1625
$ 6,375 $ 21,375 $ 0.1425
$ 8,500 $ 23,500 $ 0.1175

plant cleaning activity

Total Cost per Square

Total cost
feet cleaned
$ 14,000 $ 0.14
$ 17,500 $ 0.14
$ 21,000 $ 0.14
$ 28,000 $ 0.14

the tally of $1,313 over the next quarter.

Mapl e
Outs ourci
ng
 Mapl e
Outs ourci
ng

150,000 200,000
are feet cleaned

fferent between outsourcing the cleaning function or

hichever option is employed.