Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 22

Wings Diner has a box lunch that it sells on football game days at the local university. Each box lunch sells for $6, which includes $2.50 variable costs and $2.50 fixed cost plus a $1 markup. What is the lowest price Wings can sell its box lunch so that Wings will still make a profit?

Step 1 of 2

Contribution: Contribution is the amount of selling price after deducting the variable expenses of the entity. The entity should make a product by selling the same only when it results in a positive contribution.