Lady Marion Seafood, Inc. sells 5-pound packages of Alaska salmon. Assume its variable costs 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 5-pound package of salmon?

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost that needs to be covered:

Total Cost = Fixed Cost + (Variable Cost * Volume)
Total Cost = $250,000 + ($30 * 16,000)
Total Cost = $730,000

Next, we can use the following formula to calculate the price per package:

Price = (Total Cost + Target Profit) / Volume
Price = ($730,000 + $38,000) / 16,000
Price = $48.00

Therefore, Lady Marion Seafood should charge $48.00 per 5-pound package of Alaska salmon in order to achieve a target profit of $38,000 on a volume of 16,000 packages.