Question

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.)

Answer 1

Selling price = $1.75 per unit

Explanation:

Let x is the selling price of one gift bag.

So selling price of 395000 units will be = $39500x

Since fixed costs for producing the bag are $184000 and variable cost per unit is = $1.20

Therefore, variable cost of 395000 units will be = $1.20×395000

= $474000

Now the cost price of 395000 units will be = Fixed cost + variable cost

= 184000 + 474000

= $658000

Now we know profit = Selling price - cost price

32400 = 395000x - 658000

395000x = 32400 + 658000

395000x = 690400

x =
`(690400)/(395000)`

x = $1.75

Therefore. $1.75 per unit will be the selling price of glitter gift bags.

Answer 2

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.