Question

The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' president, a POM student, estimates that due to differing land costs, utility rates, etc., both fixed and variable costs would be different for each of the proposed sites, as follows: If it is estimated that 30 persons will be living in this new chapter house, what would be the Skulls' annual cost savings by selecting the less costly location, rather than the more costly?

Answer 1

Remaining part of the Question:

Location Fixed Cost Variable Cost

Alpha Ave $5,000 $200 per person

Beta Blvd. $8,000 $150 per person

Answer:

$1,500

Step-by-step explanation:

Alpha Ave

Total cost of Alpha Ave = Fixed Cost + Variable Cost

Total cost of Alpha Ave = $5,000 + 30 person * $200 per person

Total cost of Alpha Ave = $5,000 + $6,000

Total cost of Alpha Ave = $11,000

Beta Blvd

Total cost of Beta Blvd = Fixed Cost + Variable Cost

Total cost of Beta Blvd = $8,000 + 30 person * $150 per person

Total cost of Beta Blvd = $8,000 + $4,500

Total cost of Beta Blvd = $12,500

Cost Saving of Opting of Beta Blvd = $12,500 - $10,000 = $1,500