Southeast U's Campus Book Store Sells Course Packs for $15

question 5

Multiple Choice

Southeast U's campus book store sells course packs for $15.00 each, the variable cost per pack is $11.00, fixed costs for this operation are $300,000, and annual sales are 100,000 packs. The unit variable cost consists of a $4.00 royalty payment, VR, per pack to professors plus other variable costs of VO = $7.00. The royalty payment is negotiable. The book store's directors believe that the store should earn a profit margin of 10% on sales, and they want the store's managers to pay a royalty rate that will produce that profit margin. What royalty per pack would permit the store to earn a 10% profit margin on course packs, other things held constant?

• A) $2.55
• B) $2.84
• C) $3.15
• D) $3.50
• E) $3.85

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Definitions:

Defense Mechanism

Psychological strategies brought into play by individuals, unconsciously, to cope with reality and maintain self-image.

Compensation

Refers to the total cash and non-cash payments that employees receive in exchange for their work, including salaries, bonuses, benefits, and incentives.

Semicircular Canals

Structures in the inner ear that are part of the vestibular system, helping to regulate balance and spatial orientation.

Vestibular Sense

The sense of body movement and position, including the sense of balance.