Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $35 for 6 hours. The variable costs are $24 per 6 hour rental, and its fixed costs are $65,000 each month. What is the contribution margin per 6 hour jet ski rental?

Question

Quizplus · Accepted Answer

Contribution margin per 6 hour jet ski rental = Rental Price - Variable Cost per Rental 
Contribution Margin = $35 - $24 = $11

Since $11 is greater than the fixed cost of $0.31, Electric Jet Skis will make a profit on each rental. Therefore, the best choice is C.

Electric Jet Skis Operates a Jet Ski Rental Business