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

question 83

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 75,000 packs.The unit variable cost consists of a $4.00 royalty payment,V_R ,per pack to professors plus other variable costs of V_O = $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? Do not round your intermediate calculations.

• A) $2.50
• B) $1.88
• C) $2.78
• D) $2.25
• E) $2.00