Question

Jack 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 Jack, the contribution per unit is_________

Answer 1

Answer:

$80 per unit

Explanation:

We know that,

Contribution per unit = Selling price per unit - variable cost per unit

                                   = $100 per night - $20 per rented room

                                   = $80 per unit

Simply we deduct the variable cost per unit from the Selling price per unit so that the contribution margin can be computed

All other information which is given is not relevant. Hence, ignored it