City Ambulance Service estimates the monthly cost of responding to emergency cal
ID: 2423791 • Letter: C
Question
City Ambulance Service estimates the monthly cost of responding to emergency calls to be $15,000, plus $200 per call. a-1. In a month in which the company responds to 150 emergency calls, determine the estimated total cost of responding to emergency calls. a-2. In a month in which the company responds to 150 emergency calls, determine the estimated average cost of responding to emergency calls. b. Assume that in a given month, the number of emergency calls was unusually low. Would you expect the average cost of responding to emergency calls during this month to be higher or lower than in other months? Higher Lower
Explanation / Answer
Answer:
a1: Total Cost = Fixed cost + (Variable cost per call * Number of calls)
=$15,000 + $(200*150)
= $45,000
a2: Average cost of reponding to 150 emergency calls = Total cost / No. of emergency calls.
= $45,000/150 = $300
b: The average cost of reponding to emergency calls during the month will be higher, when the no, of emergency calls would be usually low.
Lets take an example to understand this:
Lets say that the no. of emergency calls during the month are 100.
So in this case average cost of responding to emergency call = $15,000 + (200*100) /100 = $350
So the average cost will be higher.