Question

Jacob rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000. For Jacob, the contribution per unit is

A) $100.
B) $800.
C) It cannot be determined from the information provided.
D) $1,000.
E) $80

Answer 1

Answer:

E) $80

Explanation:

Jacobs data:

Average  selling price: $100

variable costs per room: $ 20

Fixed costs: $100,000.00

profit last year: $ 20,000.

Contribution margin:  Selling price - variable costs

    = $100- $ 20

    = $80.00

Answer 2

Answer:

In the following situation:

Jacob rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000.

The Jacob's contribution per unit is:

e) 80

Explanation:

To understand this answer we need to explain a few things. First of all, te contribution unit concept is used to express, identify, or define the net profit after one unit has been sold and all the expenses have been subtracted from it. The formula to obtain it is: (Total revenues- Total Variable costs) divided by total units. Following this information we have.

Total revenue is: 100 USD per night

Total variable costs are: 20 USD per night

Total units are only one.

Therefore 80 USD is our contribution per unit.