Lady Marion Seafood, Inc.sells five-pound packages of Alaska salmon.Its variable cost per package is $30, and its fixed cost is $250,000.It wants a target profit of $38,000 on a volume of 16,000 packages.What should it charge for a five-pound package of salmon?

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Quizplus · Accepted Answer

When a firm sets an annual target of a specific dollar amount of profit, this is called target profit pricing.Profit = total revenue - total cost; that is, profit = (P F1F1F1S1F1F1F10 Q) - [FC + (UVC F1F1F1S1F1F1F10 Q)].Thus, $38,000 = (P F1F1F1S1F1F1F10 16,000) - [250,000 + ($30 F1F1F1S1F1F1F10 16,000)].Hence, P = $48.Lady Marion Seafood Inc.should charge $48 for a five-pound package of salmon.