Tyler rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20. His fixed costs are $100,000 and his target profit is $20,000. For Tyler, to earn his target profit, he will need to rent out ________ rooms.
A)100
B)1,500
C)20,000
D)1,000
E)250

Question

Quizplus · Accepted Answer

Tyler needs to cover both his fixed costs and his target profit, totaling $120,000 ($100,000 + $20,000). Each room rented contributes $80 to this goal ($100 - $20). Therefore, he needs to rent out 1,500 rooms ($120,000 / $80) to meet his target.

Tyler Rents Rooms in His Hotel for an Average of $100