Assume that you have taken over management of a small concession stand on a local beach for the summer. Your main product is iced water, popular on hot days. You've been selling 400 cups per day at 50 cents each. The cups cost 5 cents each. One of your customers suggests that you cut the price to 40 cents to make more money. For the customer to be correct, how much must your sales increase?

Question

Business

Isaiah Griffin

9 July, 23:28

Assume that you have taken over management of a small concession stand on a local beach for the summer. Your main product is iced water, popular on hot days. You've been selling 400 cups per day at 50 cents each. The cups cost 5 cents each. One of your customers suggests that you cut the price to 40 cents to make more money. For the customer to be correct, how much must your sales increase?

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Answers (1)

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Rylan Randolph · Answer 1

For the customer to be correct, I must increase my sales by 115, from 400 cups to 515 cups.

Explanation:

Considering that the cost of each cup of iced water has a cost of 5 cents, and that its sale price is 50 cents, we can say that each cup has a net profit of 45 cents. At the same time, at that price about 400 cups are sold per day, that is, a profit of $ 180 per day.

If the consumer were ignored regarding lowering the price of each cup to $ 0.40, a benefit of $ 0.35 would be obtained for each sale. Therefore, to maintain the same profit money, 515 should be sold instead of 400 cups per day (180 / 0.35 = 514.2), which would report about $ 180.25 in profit.