Question

Jason rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20. His fixed costs are $100,000 and his target profit is $20,000. For Jason, to earn his target profit, he will need to rent out ________ rooms.

A) 100
B) 20,000
C) 1,000
D) 1,500
E) It cannot be determined from the information provided.

Answer 1

D) 1,500

Step-by-step explanation:

rent per room =$100 dollars

variable cost= $ 20 dollars

fixed cost =$ 100,000.00

desired profits=$ 20,000.00

volume(V) to meet profit target;

Contribution margin per sale= $100-$20= $80

Profits = revenue-cost

=$20,000= Vx$80-$100,000

=20,000=v80-100000

v80=100,000.00+20,000

v80=120,000

v= 120,000/80

Volume =1,500