Question

Doloris is a college sophomore. She is currently living in a dorm and signed a contract to pay the dorm fees for the full academic year (9 months). The contract states the if she moves out she can sell the remaining contract to another student. The cost of the dorm is $5000 for the year.

After two (2) months of living in the dorm Doloris found an apartment with her friends and really wants to move off campus. Doloris put an add in the Alligator and had two offers for her dorm contract buy out.

1) Pay Doloris $350 per month for the 7 remaining months.

2) Move in the second semester and pay half of the original dorm fee ($2,500).

Doloris's new apartment will cost $450 in rent.

The cost for food in the dorm is $500 per month and about she estimates it is $400 in food and utility monthly expenses if she moves into the apartment.

Assume semesters are 4.5 months long.

What is the cost for Doloris to move into the apartment now?

What is the cost for Doloris to move at the end of the semester?

What is the cost for Doloris to stay in the dorm for the rest of the school year?

Which is the most economical option for Doloris?

Answer 1

Answer a : Cost of moving to an apartment now =(Rent paid in an apartment+ Cost of food in )apartment) -( Rent received from dorm + Cost of food in dorm) = ( $ 450*7+ $400*7)-($350*7)+($500*7) = ($3150+$2800)-( $2450+ $3500)= $5950- $5950 =0

Answer b :Cost of moving at the end of semester =( $2500+ $2800) - ( $350*4.5 + $500*4.5) = $5300 - $3825 =$1475

Answer c : Dolores cost of living in a dorm whole year = $5000+($500*9)= $5000+$4500= $9500

Answer d : From my point of view , Dolores should opt for second option to shift the dorm in next semester as this option has been provided a profit of $1475 and dolores saving has been increased.