Answer:
Based on the given information related to costs for each of the options, the crossover point for Tim = 6,000 room nights (round your response to the nearest whole number). If the number of room nights is less than the crossover point, then OUTSOURCING (Duffy's Maid Service) is the best option available to Tim. Based on the given room nights that Tim expects to rent (18, 250), the best option is to keep doing the service INSOURCING (doing it himself).
Explanation:
Currently, before outsourcing, Tim's total cost = $228,125 + $61,000 = $289,125. On average, he spends $15.84247 per room.
The Duffy's Maid Service offer would represent a total cost of $337,625 + $25,000 = $362,625 for the same occupation level.
the crossover point for Tim:
12.5x + 61,000 = 18.5x + 25,000
36,000 = 6x
x = 6,000 room nights
(6,000 x 12.50) + 61,000 = (6,000 x 18.50) + 25,000 = $136,000