Epicure Market prepares fresh gourmet entrees each day. On Wednesday, 80 baked chicken dinners were made at a cost of $3.50 each. A 10% spoilage rate is anticipated. At what price should the dinners be sold to achieve a 60% markup based on selling price
80 entrees cost $280
You only get to sell 72, due to spoilage.
You want your costs to be only 40% of the selling price.
280 = .4s
s = 700
So, to sell 72 entrees for $700, you need to charge $9.72 each.
To solve this problem, we need to determine the selling price of the baked chicken dinners.
First, we need to calculate the number of dinners that will be sold after the anticipated 10% spoilage rate. Since 80 dinners were made and there is a spoilage rate of 10%, we can calculate the number of dinners that will be available for sale as follows:
Number of dinners available for sale = 80 - (10% of 80)
= 80 - (0.10 * 80)
= 80 - 8
= 72 dinners
Next, we need to determine the total cost of producing the dinners. The cost per dinner is $3.50, and we made 80 dinners. Therefore, the total cost of producing the dinners is:
Total cost = Cost per dinner * Number of dinners
= $3.50 * 80
= $280
Now, let's find the selling price needed to achieve a 60% markup based on the selling price. The markup is based on the cost, so we can calculate it using the formula:
Markup = Cost / (1 - Markup percentage)
= $280 / (1 - 60%)
= $280 / (1 - 0.60)
= $280 / 0.40
= $700
Finally, divide the total selling price ($700) by the number of dinners available for sale (72) to get the price per dinner:
Price per dinner = Total selling price / Number of dinners available for sale
= $700 / 72
≈ $9.72
Therefore, the baked chicken dinners should be sold at approximately $9.72 each to achieve a 60% markup based on the selling price.