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

Answer 1

Given:

Rent per night = $100

Variable cost per rented room = $20

Fixed cost = $100,000

Profit last year = $20,000

To find:

Contribution of Jacob per unit

Solution:

Contribution per unit is the difference between selling price per unit and variable costs per unit. The formula is as follows,

$\text{Contribution margin per unit = Selling price per unit - Variable cost per unit}$

Here, Selling price per unit is the rent in the hotel per night. On substituting the given values in the above formula we get,

$\text{Contribution per unit }=\%100-\ 20\rightarrow\ 80$

Therefore, the contribution per unit is $80.

Answer 2

Answer:

$80.

Explanation: