Problem:

The owner of a motel is considering outsourcing the daily room cleanup to Duffy's Maid Service. The manager rents an average of 50 rooms for each of 365 nights. The owner's cost to clean a room is $12. The Duffy's Maid Service quote is $18 per room plus a fixed cost of $24,000 for sundry items such as uniforms with the motel's room. The owner's fixed cost for space, equipment, and supplies is $60,000.

Required:

Question 1) Determine the crossover point for the two options. Please give the formula for calculating crossover points, at least one step of calculation, and the correct answer.

Question 2) Which option should be chosen and why?

Explain the solution in detail.