DEH Corporation operates a car rental business, with a fleet of 100 cars for rental. DEH leases cars from the manufacturer for one year at a cost of…

DEH Corporation operates a car rental business, with a fleet of 100 cars for rental. DEH leases cars from the manufacturer for one year at a cost of $12,000 per car. Cars are returned to the manufacturer when the lease expires. The lease fee is non-refundable and leases cannot be ended early. DEH leases all cars at the same time, and the number of cars under lease cannot be changed during the lease year. The number of cars can be varied at the end of each lease year.

DEH pays staff commissions to manage the rental cars. It costs $200 in staff commissions for each car rented for one month. The unit of production Q is one car rented for one month. There are no staff costs if there are no rentals. The table below illustrates the commission cost concept. Costs can exceed the figures provided in the table, that is, you must understand how to compute the cost for Q = 5, 6, etc.

Total Staff Commission Costs