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Flower Mills makes Wheaties and many other food products.
Suppose the product manager of a new Flower Mills cereal has determined that the appropriate wholesale price for a carton of the new cereal is $48. The fixed costs for the production and marketing of the new product are $15million. The production manager estimates that she can sell 800,000 cartons at the $48 price.
Illustrate what is the largest variable cost per carton that can be paid and still achieve a profit of $1million.
In addition, Ashley pays $14,000 in commissions and $3,000 in legal fees in connection with the sale. Explain how much does Ashley realize (the amount realized) from the sale of her property?
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