Lakeview Apartments is an 80 unit apartment com le when the apartments are 90% o

Question

Lakeview Apartments is an 80 unit apartment com le when the apartments are 90% occupied, monthly operating costs total $220 040 en occupancy dips to 80 m complex s orried because many of the apartment residents or at a nearby manu acturing plant that has just announced ill close in Ihree months. The apartment o wne lose their jobs and move away. Assuming the same relevant range, what can the owner expect her operating costs to be if occupancy falls to 55%? hy operating costs fal to $215,480. The owner of the apartment ears that o cupancy other apartments w drop o 55% residents Let's begin by determining the formula that is used to calculate the variable cost (slope) Variable cost (slope) = Now determine the formula that is used to calculate the fixed cost component. Fixed cost Use the high-low method to determine Lakeview's operating cost equation x +S Assumrg he same relevant range, what should the owner expect her operating costs to be if occupancy falls to 55%? Round your answer to he nearest whole do ar The owner should expect her operating costs to be S | | if occupancy falls to 55%.

Explanation / Answer

Cost at 90% occupancy (800*90%) 720 = $220040 Cost at 80% occupancy (800*80%) 640 = $215480 Change in cost/Change in occupancy = Variable cost slope (220040-215480)/(720-640)= $57 Total cost-Variable cost = Fixed cost 220040-(720*57) = $179000 Operating costs at 55%(440) = 179000+(440*57)= $204080

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