A packaging company has been offered a contract to create gift boxes for perfume/cologne. The company needs to buy a special machine to make the boxes. The machine costs $3,000, and each box costs $2 for labor and materials. The perfume/cologne maker as agreed to buy each box for $5. (5 point
To determine whether the packaging company should accept the contract, we need to calculate the profit it would make.
First, we calculate the cost of producing each box by adding the cost of labor and materials: $2 + $2 = $4.
Next, we subtract the cost per box from the selling price per box to find the profit per box: $5 - $4 = $1.
Since the packaging company needs to buy a special machine that costs $3,000, the number of boxes it needs to sell to cover the cost of the machine is:
$3,000 / $1 = 3,000 boxes.
Therefore, the packaging company needs to sell at least 3,000 boxes to cover the cost of the machine. If it expects to sell more than 3,000 boxes, it will make a profit.