Organic Farming
One element of sustainability is organic farming. But if you've priced organic foods, you know they are more expensive. Organic farming costs much more than conventional farming, and those costs are passed on to consumers. For example, a dozen conventionally farmed eggs costs consumers $1.50, whereas a dozen organic eggs costs $2.80. However, if prices get too high, consumers will not purchase the organic eggs. Suppose that the average fixed costs for conventionally farmed eggs are $1 million per year but they are twice that amount for organic eggs. Organic farmers' variable costs per dozen are twice as much as well, costing $1.80 per dozen. Refer to Appendix 3, Marketing by the Numbers, to answer the following questions
1. Most large egg farmers sell eggs directly to retailers. What is the farmer's price per dozen to the retailer for conventional and organic eggs if the retailer's margin is 20 percent based on the retail price? (AACSB: Written and Oral Communication; Analytical Thinking)
2. How many dozen eggs does a conventional farmer need to sell to break even? How many does an organic farmer need to sell to break even?