Assume that you plan to open a soft ice cream franchise in a resort community du
ID: 2453312 • Letter: A
Question
Assume that you plan to open a soft ice cream franchise in a resort community during the summer months. 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, $0.45, and a franchise fee payable to Snowdrift Cooler, $0.10. A market analysis prepared by Snowdrift Cooler indicates that summer sales in the resort community should total 27,000 units. Required Determine the price you should charge for each ice cream cone to achieve a $20,000 profit for the three month period.
Explanation / Answer
price you should charge for each ice cream cone to achieve a $20,000 profit for the three month period is $1.50 Per Ice Cream Statement showing computation of Price Particulars Amount Variable Costs : Costs of Cone = 27000*.45 12,150.00 Franchisee fees = 27000*.10 2,700.00 Total Variable Costs 14,850.00 Fixed Operating Costs 5,650.00 Total Costs = VC+FC 20,500.00 Desired Profit 20,000.00 Desired Sales revenue 40,500.00 Desired Sales in units 27,000.00 Price to be Charged 1.50