Question

Which of the 4 price

options listed in the
table will maximize
Cost
per bag
$1.00
1,500,000
$1.50
800,000
$2.00 600,000
$2.75 400,000
Bags sold Profit
per bag
$0.20
$0.95 the total profit made
$0.60
$0.85
by a potato chip
manufacturer?

Answer 1

To determine the total profit made by a potato chip manufacturer, we need to multiply the profit per bag by the number of bags sold and subtract the cost per bag.

The profit per bag is the difference between the selling price and the cost per bag, so we have:

• At $1.00 per bag, the profit per bag is $0.20.
• At $1.50 per bag, the profit per bag is $0.95.
• At $2.00 per bag, the profit per bag is $0.60.
• At $2.75 per bag, the profit per bag is $0.85.

Now, we can calculate the total profit for each option:

• At $1.00 per bag, the total profit is (1,500,000 x $0.20) - (1,500,000 x $1.00) = -$900,000.
• At $1.50 per bag, the total profit is (800,000 x $0.95) - (800,000 x $1.50) = $760,000.
• At $2.00 per bag, the total profit is (600,000 x $0.60) - (600,000 x $2.00) = -$660,000.
• At $2.75 per bag, the total profit is (400,000 x $0.85) - (400,000 x $2.75) = -$740,000.

Therefore, the option that maximizes the profit is selling the bags at $1.50 each, with a total profit of $760,000.