Question

Mohammad Khan x - 0 Comments Share © AutoSave OCH File Home Insert Draw Hi ! Normal Page Break Page Custom Preview Layout Views Workbook Views RUS615 Amignment 1 2000 L e Search Page Layout Formulas Data Review View Help Rular Formula Bar E t Gndlines Headings Zoom 100% Zoom to New Arrange Freeze Selection Window All Panes- Show Split Hide unhide View Side by Side 3 Synchronous scrolling Switch Reset Window Position Windows Macros Zoum WHO A B C D E F G H I J K L M 2 The following data have been gathered try the owner of the Crestview Motel, in order to better understand the costs of operating the motel. N O P Q R S T A 3 4 Wages for desk clerks amount to $18,400/month. 5 Base charge for utilities is $3,340/month. An additional $1.80/night is incurred on average for each occupied room. 6 Fixed costs for taxes, insurance, advertising, etc. amount to $3,400/month. 7 The complimentary breakfast provided to guests costs an average $3.20 per occupied room. 8 Data regarding housekeeping costs for the last nine months are given below. Cost (S) 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 20 21 22 a) Using the hi-lo method, develop an equation for the behavior of housekeeping costs, in the form Y = a +bX 23 b) Develop an equation for total costs of operation, in the form Y-3 + bx 24 c) Using your equation, forecast total operating cost if 1,250 rooms are occupied 25 d) Why might your answer to part che unreliable? 26 e) What is the marginal cost of an occupied room? How might this information be of use to the owner? Question 1 Question 2 Question 3 Heach 1 - + 1124 1 1:15 AM Type here to search 0e @ 39x 1/30/2020

Answer 1

a. Y = 950 + 8x.

Variable housekeeping cost per room = $ ( 10,150 - 6,870) / ( 1,150 - 740 ) = $ 3,280 / 410 = $ 8 per room.

Fixed housekeeping cost per month = $ 10,150 - ( 1,150 x $ 8 ) = $ 950

b. Y = 26,090 + 13 x

Total fixed costs per month = $ ( 18,400 + 3,340 + 3,400 + 950) = $ 26,090.

Variable cost per room = $ ( 1.80 + 3.20 + 8.00) = $ 13

c. Total operating costs = $ 42,340.

Total operating costs if 1,250 rooms are occupied = $ 26,090 x ( 1,250 x $ 13) = $ 42,340

d. The answer might be unreliable since 1,250 rooms is outside the range provided.

e. The marginal cost per room is $ 13. It might be useful for the owner in deciding upon the pricing per room during off season. The fixed costs would be incurred regardless of the number of rooms occupied, and whether it is peak season or off season.. In the short run, it is the marginal cost which matters.