Southeast U's campus book store sells course packs for $15.00 each,the variable cost per pack is $12.00,fixed costs for this operation are $300,000,and annual sales are 110,000 packs.The unit variable cost consists of a $3.00 royalty payment,V_R ,per pack to professors plus other variable costs of V_O = $9.00.The royalty payment is negotiable.The book store's directors believe that the store should earn a profit margin of 10% on sales,and they want the store's managers to pay a royalty rate that will produce that profit margin.What royalty per pack would permit the store to earn a 10% profit margin on course packs,other things held constant? Do not round your intermediate calculations. A) $1.77 B) $1.74 C) $1.72 D) $1.83 E) $2.22

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The correct answer is A.The store's profit margin is given by:Profit margin = (Selling price - Variable cost - Fixed cost) / Selling priceWe want to find the royalty rate, V_R, that will give the store a profit margin of 10%. So, we can rewrite the above equation as:0.1 = (15 - 12 - V_R - 9) / 15Solving for V_R, we get:V_R = 1.77

Southeast U's Campus Book Store Sells Course Packs for $15