Bill Braddock is considering opening a Fast ‘n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Fast ‘n Clean Corporation a franchise fee of $1.10 per oil change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows:
| Number of Oil Changes |
Utility Costs |
| 4000 |
6000 |
| 6000 |
7300 |
| 9000 |
9600 |
| 12000 |
12600 |
| 14000 |
15000 |
Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each.
(a)Using the high-low method, determine variable costs per unit and total fixed costs.