Marchi Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn’s guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn’s overhead budget for the most recent month appears below:
Activity level 65 guests, Variable overhead costs Supplies $156 and Laundry $364, Fixed overhead costs Utilities $250, salaries and wages $4,480, Depreciation $1,330. Total overhead costs is $6,580.
The Inn’s variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 70 guests?
a. $42,460.00
Selected: b. $6,620.00 This answer is correct.
c. $7,086.15
d. $6,580.00
Correct! Variable cost per guest equals $156 plus $364 and that total divided by 65 guests is $8 per guest. Fixed costs of $250 plus $4,480 plus $1,330 added to the variable costs of $8 times 70 guests = $6,620.