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18 April, 18:33

Thornton Camps, Inc. leases the land on which it builds camp sites. Thornton is considering opening a new site on land that requires $2,800 of rental payment per month. The variable cost of providing service is expected to be $6 per camper. The following chart shows the number of campers Thornton expects for the first year of operation of the new site.

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total

290 330 340 360 580 600 740 750 440 470 290 410 5,600

Required:

1. Assuming that Thornton wants to earn $6 per camper, determine the price it should charge for a camp site in February and August. (Do not round intermediate calculations.)

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  1. 18 April, 20:42
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    The Answers are:

    In February, Thorton should charge $6,760

    In August, Thorton should charge $11,800

    Explanation:

    Before I take the solutions for each individual month (February and August), We are going to identify the costs used to run each of the camp site for each month, because this will form the base cost which will be added to the amount earned per camper. These costs include:

    1. rental payment per month

    2. variable service cost of $6 per camper, and the total cost here is multiplying this amount ($6) by the total number of campers.

    After this, we will multiply the amount earned per camper by the number of campers for to get the total amount on all campers for that month.

    Finally The total amount earned on the monthly campers are added to the base costs described above.

    Now, Let me take the solution of each month one after the other.

    February (330 campers)

    1. Rental cost per month = $2,800

    2. Total variable service cost on campers = 6 * 330 campers = $1,980

    3. Total amount earned on the campers = 6 * 330 = $1,980

    Amount to be charged on the land in February = $2,800 + $1,980 + $1,980 = $6,760

    For the month of August (750 campers)

    1. Rental cost per month = $2,800

    2. Total variable service cost on campers = 6 * 750 campers = $4,500

    3. Total amount earned on the campers = 6 * 750 = $4,500

    Amount to be charged on the land in August = $2,800 + $4,500 + $4,500 = $11,800
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