You and your four closest friends all love winter sports. Accordingly, you decide to spend some time during winter break at a nearby ski resort. You have reserved a chalet that will sleep six people, and you have paid a nonrefundable deposit for three nights (the resort has informed you that, if you decide to extend your trip, you can rent the chalet for up to three more nights at the same daily rate). You are contemplating driving as a group to the resort, even though it would be a cramped ride. Finally, you decide that while each person will pay for his or her own food and drinks during the trip, you will equally share all common expenses.

Required:

a. Classify

(1) The cost of gasoline for driving,

(2) The cost of food and drink, and

(3) The cost of the chalet rental (for the first three nights) as being direct (D) or indirect (I) with respect to both the trip as a whole and each person.

b. Classify

(1) The cost of gasoline,

(2) The cost of food and drinks,

(3) The cost of the chalet rental for the first three nights, and (4) the cost of the chalet rental after the first three nights as being variable (V) or fixed (F). If the cost is variable, what activity determines the magnitude of the cost? How can you use these classifications to estimate the total cost of the vacation?

c. Classify the following costs as per the cost hierarchy.

1. Cost of food and drink during the trip

2. Cost of the chalet rental

3. Cost of obtaining premium TV channels in chalet

4. Cost of time spent in planning trip

d. Suppose that, instead of driving, you and your friends could take a bus to the ski resort. In this case, each person will pay his or her own bus fare. Classify the following costs as being controllable (C) or non-controllable (NC) and relevant (R) or not relevant (NR) with respect to the friends’ two transportation options (drive or take the bus) for the trip.

1. Costs of operating the car

2. Cost of the bus fare

3. Cost of the chalet rental for the first three nights

4. Cost of the chalet rental after the first three nights