A local vendor at the county fair sells snow cones for $.50 each. When 250 snow cones are sold,
each snow cone is estimated to have $.10 in variable costs and $.15 in fixed costs. A local school
group plans on attending the fair next week and wishes to purchase 50 snowcones for $.25 each.
The vendor can sell as many as 400 snowcones per day. What is the minimum price the vendor
should charge for the snowcones?
a. $.75
b. $.25
c. $.10
d. $.50
Solution
The minimum price should be
Profit from 250 Cones
250*.50-.10*250-.15*250
=250*.25
=62.5
Minimum price to be charged should be the Variable cost
i.e. $ .10
The correct answer is C. $ .10