A hotel pays the phone company $200per month plus $.15 for each call made. During January 7,000 callswere made. In February 8,000 calls were made.

 

a)Calculate the hotel's phone bills for January and February.

b)Calculate the cost per phone call in January and in February.

c)Separate the January phone bill into its fixed and variable components?

d)What is the marginal cost of one additional phone call in January? 

e)What was the average cost of a phone call in January?

a) Computation of Hotel's Phone Bills for January and February:

For January = (7,000*$0.15)+$200 = $1,050+$200 = $1,250

For February = (8,000*$0.15)+$200 = $1,200+$200 = $1,400

b) Computation of Cost per Phone Call in January and in February:

Cost per phone call in January = $1,250/7,000 = $0.18 per phone call

Cost per phone call in February = $1,400/8,000 = $0.18 per phone call

c) Separation of the January phone bill into its fixed and variable components:

Fixed = $200

Variable = 7,000*$0.15 = $1,050

d) Computation of marginal cost of one additional phone call in January:

Since each phone call cost $0.15, the marginal cost of making one additional call in January is $0.15

e) Computation of Average Cost of a Phone Call in January:

Average Cost of a Phone Call in January = ((7,000*$0.15)+$200)/7,000 = $1,250/7,000 = $0.18