Question

Product Pricing: Single Product 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 $14,400,000, of which $5,400,000 is for administrative and selling efforts. Sales are anticipated to be 800,000 cases a year. Variable costs for processing are $36 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 $9,000,000, what is the selling price per case? Round answer to two decimal places.

Answer 1

$87 per case

Step-by-step explanation:

annual fixed costs totaling $14,400,000

• administrative and sales $5,400,000
• manufacturing overhead $9,000,000

total sales 800,000 cases

variable manufacturing $36 per case

variable sales 25% of selling price

desired profit $9,000,000

total sales 800,000X

variable manufacturing $28,800,000

fixed manufacturing $9,000,000

gross profit 800,000X - $37,800,000

- fixed sales $5,400,000

- variable sales 200,000X

net income $9,000,000

$9,000,000 = 800,000X - $37,800,000 - $5,400,000 - 200,000X

$9,000,000 = 600,000X - $43,200,000

600,000X = $52,200,000

X = $52,200,000 / 600,000 = $87