Problem:
The Cone Head House sells ice cream cones in a variety of flavors. Data for a recent week appear here:
Revenue (1,000 cones @ $1.50 each) $1,500
Cost of ingredients 530
Rent 300
Store attendant 600
Income $ 70
The Cone Head’s manager received a call from a university student club requesting a bid on 100 cones to be picked up in three days. The cones could be produced in advance by the store attendant during slack periods and then stored in the freezer. Each cone requires a special plastic cover that costs $.05.
A. What are the manager’s decision options?
B. What quantitative information is relevant for this decision?
C. Using the general decision rule, what is the minimum acceptable price per cone for this special order?
D. Explain why Cone Head’s managers might be willing to sell cones at the price you calculated in part C.