Question

A doughnut shop at a shopping mall sells a dozen doughnuts for $2.95. Beyond the fixed costs of $150 per day, it costs $1.45 for enough materials and labor to produce each dozen doughnuts. If the daily profit varies between $50 and $200, between what levels (in dozens) do the daily sales vary?

Answer 1

For each dozen sold, the unit profit is $2.95-$1.45=$1.50.

If the net profit (after overhead and cost) is $50 per day, the number of dozens sold is ($150+$50)/1.50=400/3 dozens.
If the net profit is $200, the number of dozens sold is ($150+$200)/1.5=700/3 dozens.

Thus, the daily sales vary from 133.3 dz to 233.3 dz., approximately.