Merkey Motel's Cost Function Based on Guest-Days of Occupancy for Custodial

question 6

Multiple Choice

Merkey Motel's cost function based on guest-days of occupancy for custodial cost is given as: Y = $50,000 + $7.50X.Merkey Motel expects an occupancy level of 10,000 guest days.Merkey Motel's expected total fixed cost is _____.

• A)$7.50
• B)$50,000
• C)$75,000
• D)$105,000

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Definitions:

Shut Down

The cessation of operations, often temporarily, by a business or organization.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent or salaries.

Marginal Costs

The added cost of producing one additional unit of a product or service.

Indifferent

A state of having no preference between two or more options, showing neither favor nor disfavor.