Soft Lighting can sell 15 000 lamp shades during the year. The variable expenses are $5 per lamp shade. Fixed expenses are $40 000 and the business wishes to earn a profit of $50 000. What price must Soft Lighting charge per lamp shade?

Question

Quizplus · Accepted Answer

To calculate the price Soft Lighting must charge per lamp shade, we need to consider the total expenses and the desired profit, and divide that by the number of units sold.

Total Expenses = Variable Expenses + Fixed Expenses
Total Expenses = $5 x 15,000 + $40,000
Total Expenses = $115,000

Total Revenue = Total Expenses + Desired Profit
Total Revenue = $115,000 + $50,000
Total Revenue = $165,000

Price per Lamp Shade = Total Revenue / Units Sold
Price per Lamp Shade = $165,000 / 15,000
Price per Lamp Shade = $11

Therefore, Soft Lighting must charge $11 per lamp shade to cover all expenses and earn a profit of $50,000. The best choice is D.

Soft Lighting Can Sell 15 000 Lamp Shades During the Year