Floral Expressions is a florist in a town with a large university. During footba
ID: 377136 • Letter: F
Question
Floral Expressions is a florist in a town with a large university. During football season, it sells corsages. The new manager, Rose Cafratisi, has a degree in marketing. She decides to re-evaluate Floral Expressions' pricing of corsages. Rose gathers the following information:
Fixed costs = $1,200, Selling price = $16 per unit, and Variable costs = $6 per unit.
a) To break even, Floral Expressions should sell ___________ corsages.
b.) What is the breakeven point in dollar sales volume?_____ dollars
c.) If Floral Expressions wanted to make a profit of $800, it would need to sell ___________ corsages.
d.) If Floral Expressions sold 400 corsages, how much profit could it make $__________?
Explanation / Answer
Fixed Cost (FC)= $1200
Variable Cost (VC)=$6/unit
Selling Price(SP)=$16/unit
Let the number of units of corsages be x.
FC of x unit=1200
VC of x unit=6*x
Total Cost of x unit=1200+6*x
SP of x unit=16*x
a.) Break even is the point where total cost equals the total sales,
Therefore in this situation break even is
1200+6*x=16*x
1200=16*x-6*x
1200=10*x
120=x. It shoul sell 120 corsages for break even.
b. Break even sales volume= 16*x = 16*120= 1920
Sales volume is $1920.
c.Profit =SP-CP
Profit on x unit= 16*x-(1200+6*x)
=16*x-1200-6*x
=10*x-1200
As per the question to earn $800 profit we have
800=10*x-1200
800+1200=10*x
2000=10*x
200=x. For a profit of $800, 200 corsages need to be sold.
d.) Profit for x units=10*x-1200 ( derived in above part)
Profit for 400 units=10*400-1200 (putting 400 in place of x)
= 4000-1200
=$2800
In case fof 400 corsages, profit will be $2800
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