# calculating product pricing

• Nov 12th 2012, 09:08 PM
kitchenbreak
calculating product pricing
A factory makes choclates. A box of Chocolate contains 0,9 kg. The purchase price of the ingredients is \$ 10.00 per kg. While making the Chocolates in the factory there is a waste of 20% of the gross usage of ingredients. The waste can be sold for 50% of the purchase price of the ingredients.

Question: calculate the costs of the ingredients per box of chocolates

I would like to know how this is calculated step by step. The answer is 10.13 dollars but I get 11.25 dollars.

• Nov 12th 2012, 09:33 PM
chiro
Re: calculating product pricing
Hey kitchenbreak.

If we have waste of 20% then per kg this is 10.00 * 0.2 = \$2.00 per kg. Now this is sold at half price so the final waste of the product (that can't be recovered) is \$2.00 - \$2.00 * 0.5 = \$1.00 per kg.

So over-all we waste \$1.00 per kg for every kg we buy if we buy it at \$10.00 per kg.

So now we need to figure out how much chocolate is needed and then consider the rebate we get when we sell the waste for half price (relative to purchase price).

If we waste 20% then it means that buying z amount of chocolate and wasting 20% will leave the total amount in the product which is 0.9kg. So 0.8z = 0.9 so x = 0.9kg/0.8 = 1.125kg and at \$10.00 per kg we get the cost as \$11.25. To check the weight 20% of 1.125 is 0.225 and 1.125-0.225=0.9 as expected.

So the total cost is \$11.25 and the waste is 0.225kg which means the cost of this waste before selling is 0.225kg * \$10.00 per kg = \$2.25.

The company will get back half of this by selling it at a reduced rate which means the rebate is 50% of \$2.25 = \$1.12 (roughly rounded down).

Now the total cost was \$11.25 for ingredients but they got a rebate of \$1.17 for selling off the waste at half price which means total cost is \$11.25 - \$1.12 or \$10.13 as expected.
• Nov 13th 2012, 02:02 PM
kitchenbreak
Re: calculating product pricing
Hi thanks a lot for the great explanation!