Question

A potato shortage results in an increased variable cost per potato of $.40, but selling prices remained unchanged. How many additional potatoes will the vendor have to sell to still achieve the profit objective of $750 per week

Answer 1

Answer: 40 potatoes

Step-by-step explanation:

The number of potatoes that the vendor had to see previously to get $750 in profit is;

= (Fixed cost + Profit objective) / Contribution margin

= (600 + 750) / ( 4.90 - 1.03)

= 349 potatoes

Number of potatoes to be sold with increase in cost

= (600 + 750) / (4.90 - 1.03 - 0.4)

= 389 potatoes

Additional potatoes;

= 389 - 349

= 40 potatoes

Note : Contribution margin = Sales - Variable cost