Rochelle Corporation makes reservations for vacation homes. Rochelle Corporation provides complimentary coffee packets at a cost of $2 per guest who stay at the mountain resort. The general manager reported a total cost of $5,000 for coffee during the previous quarter. The historical number of guests at the mountain resort is 10,000 guests during the year. The manager uses the formula to compute the total variable cost (y) = Variable cost per unit of activity (v) × Volume of activity (x). The manager expects 500 guests in December.What is the correct cost equation to compute y in the cost equation for 500 guests?
Accepted Solution
A:
Answer: [tex]y=2\times5[/tex]Step-by-step explanation:Given : The manager uses the formula to compute the total variable cost (y) = Variable cost per unit of activity (v) × Volume of activity (x). (1)Rochelle Corporation provides complimentary coffee packets at a cost of $2 per guest who stay at the mountain resort. i.e. Variable cost per unit of activity (v) = $2 (2)The manager expects 500 guests in December.i.e. Volume of activity (x)= 500 (3)Using (2) and (3) in (1), we getCost equation to compute y in the cost equation for 500 guests :-[tex]y=2\times5[/tex]