Question

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 $7,200,000, of which $2,700,000 is for administrative and selling efforts. Sales are anticipated to be 800,000 cases a year. Variable costs for processing are $18 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 $4,500,000, what is the selling price per case?
Round answer to two decimal places.

Answer 1

Total Fixed cost				7200000
Variable cost of processing (800000*18)				14400000
Total cost except variable selling cost				21600000
Desired profits				4500000
Amount to be recovered from 75% of selling price				26100000
Let, Selling price be x
Selling cost = 0.25x
Amount reccovered will be 0.75 X
Total amount from 800000 units = 600000X
Equation will be:
600000X= 26100000
X = 43.50 per unit
selling price = 43.50