Sheboygan Motel's cost function is given as:
Y = $120,000 + $2.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year,Sheboygan Motel has 8,000 guest days.In the next year,Sheboygan 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 custodial cost for next year?
A) $37,000
B) $120,000
C) $125,000
D) $145,000

Question

Quizplus · Accepted Answer

The expected total custodial cost for next year is calculated by substituting X = 10,000 into the cost function Y = $120,000 + $2.50X, resulting in Y = $120,000 + $2.50(10,000) = $120,000 + $25,000 = $145,000.

Sheboygan Motel's Cost Function Is Given As