Sunrise Motel's cost function is given as: Y = $50,000 + $7.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year,Sunrise Motel has 8,000 guest days.In the next year,Sunrise 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)$50,000
B)$62,500
C)$125,000
D)$137,500

Question

Quizplus · Accepted Answer

To find the total custodial cost for next year, we need to plug in X = 10,000 into the cost function:
Y = $50,000 + $7.50(10,000)
Y = $50,000 + $75,000
Y = $125,000

Therefore, the expected total custodial cost for next year is $125,000, which is answer choice C.

Sunrise Motel's Cost Function Is Given As: Y = $50,000