# Develop a cost equation for the cafeteria that can be

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Unformatted text preview: ach, the price per hour for either mowing or special projects would be the cost plus 10 percent, or \$14.08 (\$12.80 + \$1.28). Under the multi-cost-center approach, the price per hour would differ for mowing and special projects. Mowing’s price would be \$11.29 (\$10.26 + \$1.03). The price for special projects would be \$22.60 (\$20.55 + \$2.05). Thus, the costbased prices proposed to the customers for the two jobs would be as follows: One Cost Center Lawn Mowing Fertilizing and weeding 3 hours @ \$14.08 = 3 hours @ \$14.08 = \$42.24 \$42.24 Multiple Cost Centers Lawn Mowing Fertilizing and weeding 3 hours @ \$11.29 = 3 hours @ \$20.55 = \$33.87 \$67.81 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Note that with the one cost center approach, the prices are identical for a 3-hour job. By contrast, with multiple cost centers, the fertilizing and weeding price is some 60 percent above the one cost center price, and the lawn mowing job is about 20 percent below it. If we assume that the multi-cost-center approach gives us a more homogeneous collection of activities in each cost center,...
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