A 40-room motel recorded the following: total room-cleaning cost incurred and Ro
ID: 2451035 • Letter: A
Question
A 40-room motel recorded the following: total room-cleaning cost incurred and Rooms sold for the high and low months of Year 200X. Determine the variable cost per room and fixed cost per month.
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Units Sold Total Costs
High month 10,000 $10,600
Low month 4,000 $7,000
a. Variable costs per room: 0.50
Monthly Fixed Costs: $4,600
b. Variable costs per room: 0.55
Monthly Fixed Costs: $4,500
c. Variable costs per room: 0.60
Monthly Fixed Costs: $4,600
d. Variable costs per room: 0.65
Monthly Fixed Costs: $4,500
a. Variable costs per room: 0.50
Monthly Fixed Costs: $4,600
b. Variable costs per room: 0.55
Monthly Fixed Costs: $4,500
c. Variable costs per room: 0.60
Monthly Fixed Costs: $4,600
d. Variable costs per room: 0.65
Monthly Fixed Costs: $4,500
Explanation / Answer
Variable cost per unit = (Total cost at higher unit - Total cost at lower units)/ ( higher units - lower units)
= (10600 - 7000) / (10000-4000)
= 0.6
Total variable cost at 10000 units = 10000 @ 0.6
= 6000
Total cost at 10000 units = $ 10600
Fixed cost = 10600-6000
= $ 4600
Answer is (c)
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