ProHaul specializes in trans-American shipments for businesses through the delivery of containers. For every container the company loads on its trucks, ProHaul estimates the haul costs $1,000. In addition, containers are weighed and for each pound, there are hauling fees of $0.15. ProHaul plans to charge $0.49 per pound to his customers.The company finds out that to maintain the integrity of its containers, each container could only hold an average of 8,000 pounds. What would the company have to charge customers to make $5,000 in profit on each container?
ProHaul specializes in trans-American shipments for businesses through the delivery of containers. For every container the company loads on its trucks, ProHaul estimates the haul costs $1,000. In addition, containers are weighed and for each pound, there are hauling fees of $0.15. ProHaul plans to charge $0.49 per pound to his customers.
The company finds out that to maintain the integrity of its containers, each container could only hold an average of 8,000 pounds. What would the company have to charge customers to make $5,000 in profit on each container?
Calculating the value of sales price per unit to making the profit of $ 5,000. We have,
The formula of marginal costing is as follows:
(Sales Price per pound – Variable cost per pound) x Average capacity of container = Fixed Cost + Estimated profit
Here,
Sales price per pound = S (assume)
Variable cost per pound = $ 0.15
Average capacity of container = 8,000 pound
Estimated profit = $ 5,000
Fixed Cost = Estimated haul cost = $ 1,000
By substituting these value in the above formula. We get;
(S – $ 0.15) 8,000 = $ 1,000 + $ 5,000
8,000 S - $ 1,200 = $ 6,000
8,000 S = $ 7,200
S = $ 7,200 / 8,000
S =$ 0.90
Sales price per pound = $ 0.90
Therefore, sales price per pound for achieving $ 5,000 profit shall be $ 0.90
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