A company produces 1,000 packs of chicken feed per month. Sales price is $4.00 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. The CEO wishes to price the new product at a level which will bring operational income up to $1,000 per month. What price is needed?

Question

Quizplus · Accepted Answer

B) Calculations:
(4.00 × 1,000) - ($1.50 × 1,000) - $1,800 = $700
$1,000 + (1,000 × $1.90) + ($1,800 × 120%) = $5,060
$5,060/1,000 = $5.06

A Company Produces 1,000 Packs of Chicken Feed Per Month