Question

Sue Bee Honey is one of the largest processors of its product for the retail market. Assume that one of its plants has annual fixed costs totaling $16,800,000, of which $6,300,000 is for administrative and selling efforts. Sales are anticipated to be 800,000 cases a year. Variable costs for processing are $42 per case, and variable selling expenses are 25 percent of selling price. There are no variable administrative expenses. If the company desires a profit of $10,500,000, what is the selling price per case? Round answer to two decimal places.

Answer 1

The selling price per case is $101.50

Step-by-step explanation:

For desiring the profit, we have to assume the selling price per case be X

Anticipated number of cases sold × selling price per case = Fixed cost + Desired profit + Anticipated number of cases sold × variable cost per case + Anticipated number of cases sold × selling price per case × variable selling expenses percentage

800,000 × X = $16,800,000 + $10,500,000 + 800,000 × $42 + 800,000 × X × 25%

800,000X = $16,800,000 + $10,500,000 + $33,600,000 + 200,000X

800,000X = $60,900,000 + 200,000X

600,000X = $60,900,000

X = $101.50

So, the selling price per case is $101.50