MARKETING: Kroger, the country's leading grocery-only chain, added a line of private label organic and natural foods call Simple Truth to its stores. If you've priced organic foods, you know they are more expensive. For example, a dozen conventionally farmed Grade-A eggs at Kroger costs consumers $1.501.50, whereas Simple Truth eggs are priced at $3.453.45 per dozen. One study found that, overall, the average price of organic foods is 85 percent more than that of conventional foods. However, if prices get too high, consumers will not purchase the organic options. One element of sustainability is organic farming, which costs much more than conventional farming, and those higher costs are passed on to consumers. Suppose that a conventional egg farmer's average fixed costs per year for conventionally-farmed eggs are $1 million per year, but an organic egg farmer's fixed costs are fourfour times that amount. Further assume that the organic farmer's variable costs of $1.801.80 per dozen are twicetwice as much as conventional farmer's variable costs. Most large egg farmers sell eggs directly to retailers. If Kroger's margin is 2020 percent based on its retail price, the farmer's price per dozen to the retailer for conventional eggs is $1.201.20 and for organic eggs is $2.762.76. How many dozen eggs does a conventional farmer need to sell to break even? How many does an organic farmer need to sell tobreakeven? The variable cost per dozen of conventional eggs is $nothing. (Round to the nearest cent.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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MARKETING:

Kroger, the country's leading grocery-only chain, added a line of private label organic and natural foods call Simple Truth to its stores. If you've priced organic foods, you know they are more expensive. For example, a dozen conventionally farmed Grade-A eggs at Kroger costs consumers

$1.501.50,

whereas Simple Truth eggs are priced at

$3.453.45

per dozen. One study found that, overall, the average price of organic foods is 85 percent more than that of conventional foods. However, if prices get too high, consumers will not purchase the organic options. One element of sustainability is organic farming, which costs much more than conventional farming, and those higher costs are passed on to consumers. Suppose that a conventional egg farmer's average fixed costs per year for conventionally-farmed eggs are $1 million per year, but an organic egg farmer's fixed costs are

fourfour

times that amount. Further assume that the organic farmer's variable costs of

$1.801.80

per dozen are

twicetwice

as much as conventional farmer's variable costs.

Most large egg farmers sell eggs directly to retailers. If Kroger's margin is

2020

percent based on its retail price, the farmer's price per dozen to the retailer for conventional eggs is

$1.201.20

and for organic eggs is

$2.762.76.

How many dozen eggs does a conventional farmer need to sell to break even? How many does an organic farmer need to sell tobreakeven?

The variable cost per dozen of conventional eggs is

$nothing.

(Round to the nearest cent.)

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