Arley’s Bakery makes fat-free cookies that cost $1.20 each. Arley expects 30% of the cookies to fall apart and be discarded.

Question

Arley’s Bakery makes fat-free cookies that cost $1.20 each. Arley expects 30% of the cookies to fall apart and be discarded. Arley wants a 45% markup on cost and produces 200 cookies. What should Arley price each cookie? (Round your answer to the nearest cent.)

Answer 1

Arley produces 200 cookies at $1.20 per cookie. Arley's total cost of cookies is 200 * $1.20 = $240.00

If Arley wants a 45% markup on cost, then Arley expects to make $240 + (45% of $240) = $240 + ($240 * 0.45) = $240 (1 + 0.45) = $240 * 1.45 = $348.00

Arley also suspects that 30% of the cookies made will fail. So, using the same logic as above: 200 - (30% of 200) = 200 * 0.70 = 140 viable cookies.

Now we have numbers we can work with! Arley wants to make $348.00 over 140 viable cookies. So Arley needs to sell the cookies for: $348.00 / 140 cookies = $2.486 / cookie, rounded to the nearest cent would be $2.49 / cookie.