Please show clear steps Variable Cost Analysis E2A Zero Time

Please show clear steps

Variable Cost Analysis E2A. Zero Time Oil Change has been in business for six months. The company pays 5 per quart for the oil it uses in servicing cars. Each job requires an average of4 quarts of oil. The company estimates that in the next three months, it will service 250, 280, and 360 cars. 1. Compute the cost of oil for each of the three months and the total cost for all three 2. Complete the following sentences by choosing the words that best describe the cost b. Total variable cost per month (increased, decreased) as the quantity of oil used months behavior at Zero Time: a. Cost per unit (increased, decreased, remained constant). (increased, decreased)

Solution

1 Cost for month 1 = 250*4*0.75= 750 Cost for month 2 = 280*4*0.75= 840 Cost for month 3 = 360*4*0.75= 1080 Total cost for three months = 750+840+1080= 2670 2 a Cost per unit remained constant b Total variable cost per month increased as the quantity of oil used increased