Answer:
Option (a) is correct.
Step-by-step explanation:
Given that,
Variable cost per rented = $20
Average price charged per night for the room = $100
Fixed cost = $100,000
Target profit = $20,000
Contribution margin per room = Average price - Variable cost
= $100 - $20
= $80
Now, we need to determine the number of rooms rented out by dividing the sum total of fixed cost and target profit by the contribution margin per room.
Therefore, the number of rooms will be rented out is calculated as follows;
= (Fixed cost + Target profit) ÷ Contribution margin per room
= ($100,000 + $20,000) ÷ $80
= $120,000 ÷ $80
= 1,500