7 [5 points] You and a friend, now business partner, have decided to try and mak
ID: 2798646 • Letter: 7
Question
7 [5 points] You and a friend, now business partner, have decided to try and make money for the holidays by selling mixed nuts. You decide on a mixture of 50% peanuts, 20% almonds, 15% cashews, and 15% pecans. Bulk nut prices from the store are: $4.00/lb for peanuts, $6.00/lb for almonds, $6.00/lb for cashews, $8.00/lb for pecans. You plan to sell the nuts in a holiday container that costs $3.90. You and your partner agree on selling price of $25 for a container filled with 2lbs of nuts. Since it's food you must assemble the product in a food-safe facility. The facility charges $315 for unlimited access for the one month you will need. Since you and your partner are owners you will split the profit but will not be compensated for your time, use of your car, etc. Calculate the cost per unit. Image: Ka Yeung/Tinkerbox Studio What is the breakeven quantity? If you and your friend each want to make $500 for this effort, how many containers must you sell?Explanation / Answer
2 lbs of nuts per container
Proportion of nuts below
price per lb Cost per Unit
50% Peanuts (2*.5) = 1 $4 $4
20% almonds (2*.2) =.4 $6 $2.4
15% cashews (2*.15) =.3 $6 $1.8
15% pecans (2*.15) =.3 $8 $2.4
____________
Total $10.6
Holiday container cost $ 3.9
____________
Total Variable cost per unit $14.5
Facility Charges(fixed cost) $ 315.00
Selling Price per unit $ 25.0
Less: Variable cost per unit $ 14.5
____________
Contribution per unit $ 10.5
Break Even Quantity = Fixed Cost/Contribution per unit = 315/10.5=30 units
Desired Profit = $500+$500= $1,000
Requird Sales = (Desired Profit + Fixed Cost)/ Contribution per unit=$1,315/10.5 =125.23= 126 Units
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