Product Pricing: Single Product Sue Bee Honey is one of the largest processors o

Question

Product Pricing: Single Product

Sue Bee Honey is one of the largest processors of its product for the retail market. Assume that one of its plants has annual fixed costs totaling $14,400,000, of which $5,400,000 is for administrative and selling efforts. Sales are anticipated to be 800,000 cases a year. Variable costs for processing are $36 per case, and variable selling expenses are 25 percent of selling price. There are no variable administrative expenses.
  
If the company desires a profit of $9,000,000, what is the selling price per case? Round answer to two decimal places.

Explanation / Answer

Total variable cost=800000*(36+36*0.25)= $36000000 Selling price per case=(36000000+14400000+9000000)/800000= $74.25

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