Question

. produces 1000 packages of fruit sushi per month. The sales price is $5 per pack. Variable cost is $1.50 per unit, and fixed costs are $1800 per month. Management is considering adding a chocolate coating to improve the value of the product by making it a dessert item. The variable cost will increase from $1.50 to $1.90 per unit, and fixed costs will increase by 10%. The CEO wants to price the new product at a level that will bring operating income up to $4000 per month. What sales price should be charged

Answer 1

$7.88

Step-by-step explanation:

The computation is given below:

Sales price is

= ( Total sales revenue ÷ packages sold)

And,

Total sales revenue is

= ( Total Cost + Operting income )

And,

Total Cost = ( Variable Cost + Fixed cost)

Now

Variable cost = 1,000 packages × $1.90 per unit

= $1,900

And,

Fixed cost = $1,800 × 110%

= $1,980

so

Total cost = $1,900 + $1,980

= $3,880

Now

Total sales revenue is

= $3,880 + $4,000

= $7,880

Now

Sales price = $7,880 ÷ 1,000 packages

= $7.88