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Queensland Window Washers (QWW) provides window washing services to commercial clients. QWW owner, Peter Dutter, makes sales calls himself and quotes on jobs based on square footage of window surface. QWW charges customers $0.12 per square foot. Peter estimates that his company will work a total of 2,000 jobs during the following financial year 2020/21. Each job averages 2,000 square feet of window surface and requires 5 direct labour hours and 12.5 km of travel. Peter pays his window washers $19 per hour. Other labour benefits equal 20% of wages. Wages and benefits are considered direct labour costs. The following data relates to the overhead costs based on 2000 jobs performed and 10,000 direct labour hours (DLH):

Variable overhead costs:

Suppliers ($4.40 per DLH) $ 44,000

Fuel ($7.50 per job) $ 15,000

Fixed costs (to support capacity of 2,400 jobs and 12,000 direct labour hours)

Indirect labour $ 20,000

Depreciation 75,000

Other 28,000

Total budgeted overhead costs $123,000

Required

1. Prepare a direct labour budget in hours and dollars for the financial year 2020/21. (2 marks)

2. Calculate the budgeted total cost of all jobs for the financial year 2020/21. (3 marks)

3. Prepare a revenue budget for the financial year 2020/21. (1 mark)

4. Peter believes that spending $18,000 in additional advertising will lead to a 5% increase in the number of jobs.

1. Prepare a new direct labour budget in hours and dollars for the financial year 2020/21. (1 mark)

2. Calculate the budgeted total cost of all jobs for the financial year 2020/21 assuming this change is made. (5 marks)

3. Prepare a revenue budget for the financial year 2020/21 assuming this change is made. (1 mark)

4. Based on the change in budgeted operating income, would you recommend the investment in advertising? Briefly discuss. Support your answer with appropriate calculations. (2 marks)

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