Kroger, the country's leading grocery-only chain, added a line of private label organic and natural foods call Simple Truth to its stores. If you've priced organic foods, you know they are more expensive. For example, a dozen conventionally farmed Grade-A eggs at Kroger costs consumers
whereas Simple Truth eggs are priced at
per dozen. One study found that, overall, the average price of organic foods is 85 percent more than that of conventional foods. However, if prices get too high, consumers will not purchase the organic options. One element of sustainability is organic farming, which costs much more than conventional farming, and those higher costs are passed on to consumers. Suppose that a conventional egg farmer's average fixed costs per year for conventionally-farmed eggs are $1 million per year, but an organic egg farmer's fixed costs are
times that amount. Further assume that the organic farmer's variable costs of
per dozen are
as much as conventional farmer's variable costs.
Most large egg farmers sell eggs directly to retailers. If Kroger's margin is
percent based on its retail price, the farmer's price per dozen to the retailer for conventional eggs is
and for organic eggs is
How many dozen eggs does a conventional farmer need to sell to break even? How many does an organic farmer need to sell tobreakeven?
The variable cost per dozen of conventional eggs is
(Round to the nearest cent.)