Snappy Gifts wants a net profit of $32,400 on its new glitter gift bag. The fixed costs for producing the bag are $184,000 while the variable cost per unit is $1.20. If the estimated unit sales are 395,000 units, what selling price per unit should Snappy try? (Round to the nearest cent.)

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Mathematics

29 November, 02:49

Snappy Gifts wants a net profit of $32,400 on its new glitter gift bag. The fixed costs for producing the bag are $184,000 while the variable cost per unit is $1.20. If the estimated unit sales are 395,000 units, what selling price per unit should Snappy try? (Round to the nearest cent.)

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Willow Hudson · Answer 1

Let x be the selling price of the bag. The revenue that the company will get from the sales of the bag is equal to

revenue = 395000x

The total cost is equal to the sum of the fixed and variable cost which can be expressed as,

184000 + (1.20) (395,000)

The net profit is calculated by subtracting the cost from the revenue. That is,

32,400 = 395000x - (184000 + 474000)

The value of x is equal to $1.748.