Problem8 The Boyton Motel\'s costs at two different sales levels are as follows
ID: 2795361 • Letter: P
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Problem8 The Boyton Motel's costs at two different sales levels are as follows Monthly Room Sales 2,000 3,000 Payroll $15,000 40,000 9,200 2,000 8,000 4,000 8,000 2,000 3,000 Salaries J Wages M Employee benefits Supplies $15,000 60,000 10,700 3,000 8,000 5,000 8,000 2,000 3,000 F Utilities Other operating costs Building rent Interest expense Insurance Required: 1. Identify each cost as fixed, variable, or mixed. 2. What are the total estimated monthly fixed costs? 3. What are the total estimated variable costs per room sold? 4. Develop a single equation to estimate total costs at various levels of activity 5. Project the total costs if 3,500 rooms are sold.Explanation / Answer
Answer 1.
Fixed Costs:
Salaries, Utilities, Building Rent, Interest Expense, Insurance
Variable Costs:
Wages, Supplies
Mixed Costs:
Employee Benefits, Other Operating Costs
Answer 2-3.
Wages for 3,000 rooms = $60,000
Wages per room = $60,000 / 3,000
Wages per room = $20.00
Supplies for 3,000 rooms = $3,000
Supplies per room = $3,000 / 3,000
Supplies per room = $1.00
Employee Benefits for 2,000 rooms = $9,200
Employee Benefits for 3,000 rooms = $10,700
Employee Benefits per room = ($10,700 - $9,200) / (3,000 - 2,000)
Employee Benefits per room = $1.50
Fixed Employee Benefits = $10,700 - $1.50 * 3,000
Fixed Employee Benefits = $6,200
Other Operating Costs for 2,000 rooms = $4,000
Other Operating Costs for 3,000 rooms = $5,000
Other Operating Costs per room = ($5,000 - $4,000) / (3,000 - 2,000)
Other Operating Costs per room = $1.00
Fixed Other Operating Costs = $5,000 - $1.00 * 3,000
Fixed Other Operating Costs = $2,000
Total Variable Costs per room = Wages per room + Supplies per room + Employee Benefits per room + Other Operating Costs per room
Total Variable Costs per room = $20.00 + $1.00 + $1.50 + $1.00
Total Variable Costs per room = $23.50
Total Fixed Costs = Salaries + Employee Benefits + Utilities + Other Operating Costs + Building Rent + Interest Expense + Insurance
Total Fixed Costs = $15,000 + $6,200 + $8,000 + $2,000 + $8,000 + $2,000 + $3,000
Total Fixed Costs = $44,200
Answer 4.
Total Cost = $23.50 per room + $44,200
Answer 5.
Number of rooms = 3,500
Total Cost = $23.50 * 3,500 + $44,200
Total Cost = $126,450
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