Question

Aaron needs to hire a waiter. Waiter A is offering his services for an initial $20 in addition to $5.50 per hour. Waitress B is offering her services for an initial $24 in addition to $4.50 per hour. When will the two waiters charge the same amount of money?

Answer 1

The indifference point is 4 hours.

Explanation:

Giving the following information:

Waiter A:

Fixed cost= $20

Unitary variable cost= $5.5 per hour

Waiter B:

Fixed cost= $24

Unitary variable cost= $4.5

First, we structure the total cost formula for each waiter:

Waiter A= 20 + 5.5*x

Waiter B= 24 + 4.5*x

x= number of hours

Now, we equal both formulas and isolate x:

20 + 5.5x = 24 + 4.5x

1x = 4

x= 4

The indifference point is 4 hours.

Prove:

Waiter A= 20 + 5.5*4= $42

Waiter B= 24 + 4.5*4= $42