Tim Urban, owner/manager of Urban\'s Motor Court in Key West, is considering out

Question

Tim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 50 equals the total rooms rented for the year). Tim's cost to clean a room is $13.50 The Duffy's Maid Service quote is $18.00 per room plus a foxed cost of $26,000 for sundry items such as uniforms with the motel's name. Tim's annual fixed cost for space, equipment and supplies is $61,000 Based on the given information related to costs for each of the options, the crossover point for Tim 7778 room nights (round your response to the nearest whole number) If the number of room nights is less than the crossover point, then not outsourcing is the best option available to Tim Based on the given room nights that Tim expects to rent (18 .250), the best option is lnot outsourcing 17 pm pm 9pm Enter your answer in the answer box 06/ 17 59pm

Explanation / Answer

Let the number of room nights be x

Cost of Tim = Annual fixed cost + cost of cleaning rooms * number of rooms

=> 61000 + 13.50x

Cost of Duffy Mad service = Annual fixed cost + cost of cleaning rooms * number of rooms

=> 26000 + 18x

Break even point (Cost of Tim = Cost of Duffy mad service)

61000 + 13.50x = 26000 + 18x

4.5x = 35000

x = 35000/4.5 = 7777.7778

Hence the first answer is equal to 7778

If the number of room nights is less than the cross over point, then outsourcing will be the cheaper option

Based on the given room nights, the best option is not outsourcing

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