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Assume that you plan to open a soft ice cream franchise in a resort community during the summer months
Assume that you plan to open a soft ice cream franchise in a resort community during the summer months. The fixed operating costs for the three-month period are projected to be $5,650. Variable costs per serving include the cost of the ice cream and cone $0.50, and a franchise fee payable to Austrian Ice, AG, $0.15. A market analysis prepared by Austrian Ice indicates that summer sales in the resort community should total 24,000 units.
- Determine the price you should charge for each ice cream to achieve a $20,000 profit for the three-month period.
Expert Solution
Sellingpricepericecream=Totalcost+DesiredProfitNumberofunitsSellingpricepericecream=Totalcost+DesiredProfitNumberofunits
Sellingpricepericecream=($21,250+$20,00024,000)Sellingpricepericecream=($21,250+$20,00024,000)
Sellingpricepericecream=$1.72Sellingpricepericecream=$1.72
Working note:
| Particulars | Shares |
|---|---|
| Variable Cost (($0.50 + $0.15) * 24,000) | $15,600 |
| Add: Fixed Cost | $5,650 |
| Total cost | $21,250 |
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