Question

Wages for desk clerks amount to $18,400/month.
Base charge for utilities is $3,340/month. An additional $1.80/night is incurred on average for each occupied room.
Fixed costs for taxes, insurance, advertising, etc. amount to $3,400/month.
The complimentary breakfast provided to guests costs on average $3.20 per occupied room.
Data regarding housekeeping costs for the last nine months are given below.
	Cost ($)	Rooms occupied
	8,370	940
	7,990	880
	10,290	1,120
	9,120	1,000
	6,870	740
	9,345	1,070
	7,470	800
	10,150	1,150
	9,390	950
a) Using the hi-lo method, develop an equation for the behavior of housekeeping costs, in the form Y = a + bX
b) Develop an equation for total costs of operation, in the form Y = a + bX
c) Using your equation, forecast total operating cost if 1,250 rooms are occupied
d) Why might your answer to part c be unreliable?
e) What is the marginal cost of an occupied room? How might this information be of use to the owner?

Answer 1

Given data that Page | Cost(s) Rooms occupied 8,310 १५० 880 10,२१० 1,100 9,100 1,000 6,870 140 1,070 १,345 1,410 800 - 10,150 1,150 9,390 450

page 2 a: 9=950+88 Vaspiable House Keeping cost peop stoom = $ (10,150 - 6870) / (11150-440) - $312801410 = $ 8 pesy goom Fixed housekeeping cost per month = $10,150 - (1,150 x $8) = $ 950 b. 4 = 26,090 4134 Total fixed costs per month = $ (18,400+3,340 + 3,400+ 950) : $ 26,090 Vasjiable cost peo goom = $ (1.80 +3.20 +8.00) = $13 c) Total opegating costs = $ 42,340 Total opegating costs if 1,250 900ms asje occupied = $ 26,090 x (19250 x $13) • $ 42,340

page 3 di The Answest might be ungeliable since 19250 400ms is outside the gange psovided. e. The Marginal cost peg soom is $13. 14 might be useful fosy the owner in deciding upon the policing pesy goom during off season. The fixed costs would be incurred Reqaqdless of the number of sooms occupied, and whether it is peak season 09 off season ... In the shoot sun, it is the marginal cost which matters.