So, I’m sitting in my marketing class this morning and our teacher tells us that we’re covering pricing. Basic math skills of addition, subtraction, multiplication, and division required. She hands out a practice worksheet with five problems that I literally finished within two minutes.
Then I had to sit there for the rest of class having my brain cells slowly murdered while she went through them step by step by agonizing step because, “Some of you don’t get math.”
If we’re so bad that we can do basic math, there’s a failing in the elementary school system. Seriously, fourth graders do harder math than this AND they do it in their heads. We get a calculator. What has happened that we can’t add?
Anybody want to test their brain, here you go:
Formula Required: Profit = Revenue – Total Cost
And since some of you may not have taken accounting or the like;
Revenue = Price x Quantity
Total Cost = Fixed Costs + Variable Costs
So the entire formula is Profit = (Price x Quantity) – (Fixed Costs + Variable Costs)
Futon Factory Inc. makes and sells Futons. The fixed costs (as in these costs will always be the same) for this firm in $25,000 while the unit variable cost (as in this cost will be applied per unit) is $30. If the company is able to sell only 10 futons in the first year, at what price should they have sold each futon to break-even (as in profits = 0)? Assume each futon is sold at the same price.
I’ll post the answer in the comments if you’d like to check it.