The manager of a local motel asked you to figure out his cost structure to project...
The manager of a local motel asked you to figure out his cost structure to project his future operations. According to his records, the motel recorded the total costs of $72,000 by selling 7,500 rooms during the busiest month of the past year. During the slowest month, it sold 4,500 rooms at the total costs of $48,000. Based on the given information, please answer the following questions.
Find out the motel’s fixed cost amount per month
Find out the motel’s variable cost per room sold?
Homework Answers
| Total Costs | Number of Rooms Sold | |
| At High Point | $ 72,000 | 7500 |
| At Low Point | $ 48,000 | 4500 |
| Change | $ 24,000 | 3000 |
Working:
Variable cost per room sold = $24000/3000 = $8 per room
Fixed cost per month (at the high point) = $72000 - (7500 x $8) = $72000 - $60000 = $12000 per month
Fixed cost per month (at the low point) = $48000 - (4500 x $8) = $48000 - $36000 = $12000 per month
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