Sunset Motel's cost function is given as:
Y = $75,000 + $9.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year,Sunset Motel has 8,000 guest days.In the next year,Sunset Motel expects an occupancy level of 10,000 guest days.(All costs next year will remain in the same relevant range as the current year.)What is the expected total variable custodial cost for next year?
A) $60,000
B) $75,000
C) $95,000
D) $170,000

Question

Quizplus · Accepted Answer

Using the given cost function, we can calculate the variable cost per guest-day of occupancy as follows:

Variable cost per guest-day = $9.50

Therefore, the expected total variable custodial cost for next year can be calculated as follows:

Expected variable cost = Variable cost per guest-day * expected guest-days

Expected variable cost = $9.50 * 10,000

Expected variable cost = $95,000

Therefore, the expected total variable custodial cost for next year is $95,000. The correct choice is C.

Sunset Motel's Cost Function Is Given As