Determining the Selling Price for a Profit: A Case Study on Blending Assam and Darjeeling Tea
To better understand how to determine the selling price per kg of a blended tea mixture to achieve a desired profit, let's look at a real-world example. A businessman wishes to blend Assam tea and Darjeeling tea in a specific ratio and sell the mixture at a profit of 12%. We'll walk through the steps required to calculate the selling price.
Problem Description
The businessman blends Assam tea costing Rs. 70 per kg with Darjeeling tea costing Rs. 110 per kg in a ratio of 3:1. What should be the selling price per kg of the new mixture to have a profit of 12% for him?
Solution
Step 1: Cost Price Calculation
The first step involves calculating the cost of the mixture. Given the ratio of 3:1, let's assume the total quantity of the mixture is 4 kg. This means 3 kg of Assam tea and 1 kg of Darjeeling tea.
Cost of Assam tea (Rs. 70 per kg for 3 kg):
3 kg times; Rs. 70 Rs. 210
Cost of Darjeeling tea (Rs. 110 per kg for 1 kg):
1 kg times; Rs. 110 Rs. 110
Total cost of the mixture Rs. 210 Rs. 110 Rs. 320
Cost price per kg of the mixture:
Cost price per kg Total cost / Total quantity Rs. 320 / 4 kg Rs. 80
Step 2: Selling Price for 12% Profit
To find the selling price (SP) that includes a 12% profit on the cost price, we follow these steps:
Calculate the profit: Profit Cost price times; (12/100) Rs. 80 times; 0.12 Rs. 9.6 Calculate the selling price: Selling Price Cost price Profit Rs. 80 Rs. 9.6 Rs. 89.60Conclusion
The businessman should set the selling price per kg of the new mixture at Rs. 89.60 to achieve a profit of 12%.
Cost Price Calculation
Cost price is the price at which the businessman acquires the goods before adding any profit. It is crucial for determining the selling price and ensuring a desired profit margin. In this case, the cost price per kg of the blended tea is Rs. 80, calculated as follows:
Total cost of the mixture: Rs. 320 Total quantity of the mixture: 4 kg Cost price per kg: Total cost / Total quantity Rs. 320 / 4 kg Rs. 80Profit Margin Calculation
Profit margin is the percentage of the cost price that the businessman aims to add as profit. In this example, the desired profit margin is 12%. To find the selling price, follow these steps:
Calculate the profit: Profit Cost price times; (12/100) Rs. 80 times; 0.12 Rs. 9.6 Add the profit to the cost price to get the selling price: Selling Price Cost price Profit Rs. 80 Rs. 9.6 Rs. 89.60Blended Tea Pricing
Blended tea pricing involves balancing the cost of different tea types to create a mixture that meets specific market demands. The example provided shows how to calculate the selling price based on the cost price and desired profit margin. This is a crucial skill for tea merchants and businesses dealing with blended products.
Understanding the cost price and profit margin is essential for setting the right selling price, ensuring profitability, and maintaining the quality and desirability of the blended tea products.