Pricing Decision Caroline’s Candy Corner sells gourmet chocolates. The company buys chocolates in bulk for $5 per pound plus 5% sales tax. Credit terms are 2/10, net 25; and the company always pays promptly to take advantage of the discount. The chocolates are shipped to Caroline FOB shipping point.

Shipping costs are $0.05 per pound. When the chocolates arrive at the shop, Caroline’s Candy repackages them into one-pound boxes labeled with the store name. Boxes cost $0.70 each. The company pays its employees an hourly wage of $5.25 plus a commission of $0.10 per pound.

Required 1. What is the cost per one-pound box of chocolates?

2. What price must Caroline’s Candy charge in order to have a 40% gross profit?

3. Do you believe this is a sufficient gross profit for this kind of business? Explain. What other costs might the company still incur?