A tour operator, Colby Overland Limited, is organising a coach trip to Russia as one of its new season's forthcoming attractions. Two of the major costs incurred are described as follows:

i) Coach costs. Each coach holds up to 40 passengers. The total cost of hiring a coach for the fortnight long trip is £14 000. The company will book only as many coaches as it needs. When the 41st holiday reservation is made, another coach is booked (and a further coach is booked upon receipt of the 81st holiday reservation, and so on). Because of constraints imposed by the limited availability of hotel rooms in Omsk, no more than four coachloads of passengers would be taken on the trip.

ii) Hotel costs. Each time a holiday reservation is made the company faxes the hotel in Omsk to make the extra booking. If no more rooms are available, the hotel refuses the booking and the tour is regarded as full. The hotel cost per passenger is £280.Required:

i) Using either graph paper or a spreadsheet program graphing facility plot each of these costs onto a separate graph. The number of holiday reservations should be shown on the horizontal (x) axis and cost on the vertical (y) axis.

ii) Classify each of the costs as one of the following:

variable

- fixed

- stepped

- semi-variable.

Answer rating: 100% (QA)

i Coach Costs The coach costs can be classified as fixed costs as they do not change regardless of t... View the full answer