Question

Jeremy opens a chocolate shop in the city. He pays $1,500 a month for rent and maintenance of the shop. The price of raw materials and manufacturing the chocolates is $6,000 a month. He sells the chocolates individually and in boxes of a dozen. Jeremy understands that his business needs a little time to become a success and decides that he wants to build a customer base initially. He is happy to break even for the first year. If Jeremy sells 2,400 individual chocolates and 50 boxes a month, how should he price his chocolates to break even, given the costs? (Assume that the price of a box is the same as the price of 12 individual chocolates.)

Answer 1

Amount of money paid by Jeremy as rent and maintenance of shop per month = $1500
Cost of raw materials and manufacturing per month = $6000
Total cost that Jeremy has to spend per month = (1500 + 6000) dollars
                                                                            = 7500 dollars
Number of individual chocolates sold = 2400
Number of chocolates sold in boxes = 50 boxes
                                                           = (12 * 50) chocolates
                                                           = 600 chocolates
Then
Total number of chocolates sold by Jeremy = 2400 + 600
                                                                       = 3000
Now
Price of each chocolate = 7500/3000 dollars
                                       = 75/30 dollars
                                       = 5/2 dollars
                                       = 2.5 dollars
Price of 600 chocolates = 600 * (5/2) dollars
                                       = 300 * 5 dollars
                                       = 1500 dollars
Price of 12 chocolates = (1500/600) * 12
                                     = 15 * 2
                                     = 30 dollars
Then
We can say that each box of chocolate should be sold at $30. All the loose chocolates should be sold at $2.5 each.