Question

A Company is evaluating rental prices. Historical data show that Friday and Saturday have twice the rentals of other days of the week. The following information pertains to the store's normal operations per week: Average rentals per day on Friday and Saturday 1,350 Average rentals per day on Sunday through Thursday 600 Store hours per day 10 Total units available for rent 10,000 Variable operating costs per hour $43 Marketing costs per week $1,800 Customer service costs per week $250 The store manager wants to charge more for rentals on Friday and Saturday. What is the minimum price that should be charged during peak rental days? (Round your answer to the nearest cent.)

Answer 1

Answer:

$1.01

Explanation:

For computing the minimum price first we need to find the following things which are shown below:

1. Variable operating cost per week.

=  Variable operating costs per hour × Store hours per day × number of days

= $43 × 12 hours per day × 7 days

= $3,612

2. Now total cost per week is

Total cost per week = Variable operating costs per week + Marketing costs per week + Customer service costs per week

= $3,612 + $1,900 + $250

= $5,762

3. After calculating, the minimum price is

= Total costs per week ÷  Rental per week

where,

Total cost per week is $5,762

And, the rental per week is

= ($1,350 × 2 days) + ($600 × 5 days)

= $2,700 + $3,000

= $5,700

So, the minimum price is  

= $5,762 ÷ $5,700

= $1.01