Plaza Video Rentals 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:
$$\begin{array} { l r }
\text { Average rentals per day on Friday and Saturday } & 1150 \
\text { Average rentals per day on Sunday through Thursday } & 500 \
\text { Store hours per day } & 12 \
\text { Total units available for rent } & 10000 \
& \
\text { Variable operating costs per hour } & \$ 40 \
\text { Marketing costs per week } & \$ 1500 \
\text { Customer service costs per week } & \$ 250
\end{array}$$
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?

Question

Plaza Video Rentals 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:
$$\begin{array} { l r } 
\text { Average rentals per day on Friday and Saturday } & 1150 \
\text { Average rentals per day on Sunday through Thursday } & 500 \
\text { Store hours per day } & 12 \
\text { Total units available for rent } & 10000 \
& \
\text { Variable operating costs per hour } & \$ 40 \
\text { Marketing costs per week } & \$ 1500 \
\text { Customer service costs per week } & \$ 250
\end{array}$$
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?

Quizplus · Accepted Answer

To find the minimum price, calculate the total weekly costs and divide by total rentals. Total costs = (Variable costs per hour * Store hours per day * 7 days) + Marketing costs + Customer service costs = (40 * 12 * 7) + 1500 + 250 = $5050. Total rentals = (1150 * 2 days) + (500 * 5 days) = 4800. Minimum price = Total costs / Total rentals = 5050 / 4800 = $1.05. The closest higher price option is $1.07.

Plaza Video Rentals Is Evaluating Rental Prices The Store Manager Wants to Charge More for Rentals on Friday