Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

Exercise 1

Cornerstone Exercises
Bo's Gym is a complete fitness center. Owner Bo Sanderson employs various fitness trainers who are expected to staff the front desk and to teach fitness classes. While on the front desk, trainers answer the phone, handle walk-ins and show them around the gym, answer member questions about the weight machines, and do light cleaning (wiping down the equipment, vacuuming the floor). The trainers also teach fitness classes (e.g., pilates, spinning, body ump) according to their own interest and training level. The cost of the fitness trainers is $500 per month and $25 per class taught. Last month, 100 classes were taught.
Required:
1. Develop a cost equation for total cost of labor.
2. What was total variable labor cost last month?
3. What was total labor cost last month?
4. What was the unit cost of labor (per class) for last month?
5. What if Bo increased the number of classes offered by 100 percent? What would be the total labor cost? The unit labor cost? Explain why the unit labor cost decreased.