Answer:
sales price = $6.33
Explanation:
we will calculate the aquariums price based on the Break-even formula:
[tex]\frac{Fixed\:Cost + Target \: Profit}{Contribution \:Margin} = Units\: to \: Profit_{units}[/tex]
100,000 + 90,000 = 190,000 total contribution from the aquariums
units to produce 50,000
[tex]\frac{190,000}{Contribution \:Margin} = 50,000[/tex]
190,000/50,000 = contribution Margin
190,000 / 50,000 = 3.8 dollars
Each aquarium must provide a 3.8 dollar contribution
sales price - variable price = contribution margin
sales price - variable price = 3.8
we know that variable cost are 40% of sales price, so we replace on the formula for that expression:
sales price - 40% sales price = 3.8
now we solve:
1 sales price - 0.4 sales price = 3.8
0.6 sales price = 3.8
sales price = 3.8/0.6 = 6.33
