Question

MGMT 328 TR 2:30pm Spring 2020 Homework: Process Strategy Save ne 1 of 8 (5 complete) HW Score: 62.5%, 5 of 8 pts Score: 0 of 1 pt Problem 7.7 Question Help Scoi Tim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 x 50 equals the total rooms ES: rented for the year). Tim's cost to clean a room is $13.50. The Duffy's Maid Service quote is $19.00 per room plus a fixed cost of $25,000 for sundry items such as uniforms with the motel's name. Tim's annual fixed cost for space, equipment, and supplies is $61,000 Based on the given information related to costs for each of the options, the crossover point for Tim = your response to the nearest whole number) room nights (round ition ition

Answer 1

Let the crossover point is x rooms for Tim.

Costs for Tim:
Clean room = $13.50

Fixed cost = $61000

Cost for Maid service:

Clean room = $19.00

Fixed cost = $25000

We know that crossover point is that point, when cost for both are equal.

Hence

Costs for Tim:

13.50*x + 61000

Costs for Maid service:

19*x + 25000

Hence

• 13.5*x + 61000 = 19*x + 25000
• 19*x – 13.5*x = 61000 – 25000
• 5.5*x = 36000
• x = 36000 / 5.5 = 6545.45

So the crossover point for number of rooms is 6545 (rounding to nearest whole number) rooms.

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