Question

Look at this price label for a 15 oz box of Cheerios cereal. The retail price for the cereal—the price you and I pay in the grocery store—is $3.95. Note also that the store is required to provide a unit price for the cereal. The unit price is 0.263 cents per ounce. You can see for yourself where that unit price comes from:

            $3.95 / 15 oz. = $ 0.263

Try it in your calculator for yourself! The good news is, you don’t need to carry a calculator to the grocery store and do this math for yourself—NY State law requires the store to label their prices this way. Every product in the product category (in this case, cereal) is required to be priced on a common basis (in this case, per ounce), so that consumers can make easy comparisons across different brands and sizes that are offered. If you look at unit prices, you can determine which product is the most cost effective.

Now imagine that this grocery store also has a 28 oz box of Cheerios with a retail price of $6.95.

1. What is the unit price for this box of Cheerios?
   
   
2. Which size—the 15 oz. or the 28 oz.—is the better value for consumers? In other words, which box is cheaper on a per-ounce basis?
   
   
3. The grocery store has a store brand called O’Cheeries! It is sold in a 10 oz box at a retail price of $2.99. If you don’t care about brand name, and are going to make your decision totally on the best value for your money, which option should you choose:
   10 oz O’Cheeries, 15 oz Cheerios, or 28 oz Cheerios?

Answer 1

For the 15 oz. size, the retail price is $3.95 and the unit price per ounce is $0.263.

Now, for the 28 oz. box of Cheerios, the retail price is $6.95. Accordingly, the unit price per ounce is $6.95 / 28 oz. = $0.248.

Hence, we can say that the 28-ounce box is cheaper on a per-ounce basis and provides better value for the consumers.

Now, the grocery store also has a store brand called O'Cheeries which is sold in a 10 oz box and the retail price for the same is $2.99. The unit price per ounce for this 10 oz box would be $2.99 / 10 oz = $0.299.

If you don’t care about the brand name and are going to make your decision totally on the best value for your money, the 28 oz. box size should be chosen since it has the lowest per-ounce unit price of $0.248.