Question

Maria Lorenzi owns an ice cream stand that she operates during the summer months in West Yellowstone, Montana. She is unsure how to price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $4.80 and 2,185 cones were sold. During the second week, she priced the cones at $5.30 and 1,750 cones were sold. The variable cost of a cone is $1.00 and consists solely of the costs of the ice cream and the cone itself. The fixed expenses of the ice cream stand are $2,030 per week. Required: 1. What profit did Maria earn during the first week when her price was $4.80

Answer 1

The correct answer is $6,283 .

Step-by-step explanation:

As per the data given in the question,

Sales = 2,185 × $4.8

= $10,488

Variable cost = 2,185 × $1.00

= $2,185

Contribution = Sales - Variable cost

= $10,488 - $2,185

= $8,303

Fixed cost = $2,030 per week

We can calculate the profit by using following formula:

Profit = Contribution - Fixed cost

By putting the value in the formula, we get

= $8,303 - $2,020

= $6,283