Suppose the Cost of Operating a 100 Room Hotel for a Night

question 75

Multiple Choice

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

• A)rent the room because the marginal benefit exceeds the marginal cost.
• B)rent the room because the marginal benefit exceeds the average cost.
• C)not rent the room because the marginal benefit is less than the marginal cost.
• D)not rent the room because the marginal benefit is less than the average cost.

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Definitions:

Process Costing

It's an accounting methodology utilized in manufacturing where costs are assigned to products based on the processes they go through, often used for homogeneous items.

Work in Process

This refers to the portion of manufactured goods that are not yet completed in the production process.

Manufacturing Overhead

All indirect costs associated with the production process, excluding direct materials and direct labor.

T Accounts

A bookkeeping tool used to visualize and simplify the recording of transactions in debit and credit format.