Product Pricing: Two Products

Assume Spindrift Beverage Co$.$ manufactures two products, flavored water and carbonated water, both on the same assembly lines and packaged $30$ cans per pack. The predicted sales are $150,000$ packs of flavored water and $500,000$ packs of carbonated water. The predicted costs for the year are as follows.

Variable Costs Fixed Costs

Materials $$200,000$ $$600,000$

Other $150,000700,000$

Flavored water uses $25\%$ of the materials costs and $10\%$ of the other costs. Carbonated water uses $75\%$ of the materials costs and $90\%$ of the other costs. The management of Spindrift desires an annual profit of $$450,000.$

$($a$)$ What price should Spindrift charge for each pack if management believes the carbonated water sells for $20$ percent more than the price of flavored water? Rounds answers to the nearest cent.

Flavored water: $Answer

$1\mathrm{.}83$ wrong answer

Carbonated water: $Answer

$2\mathrm{.}2$ wrong answer

$($b$)$ What is the total profit per product using the selling prices determined in part $($a$)?$ Use negative signs with answers, if appropriate.

Flavored water: $Answer

$10,500$ wrong answer

Carbonated water: $Answer

$(130,135)$ wrong answer