Each day, Tasty Tortilla Company incurs total costs of $8,000 to process flour i

Question

Each day, Tasty Tortilla Company incurs total costs of $8,000 to process flour into tortillas. The company can then sell the tortillas as is for total daily revenue of $22,500. Alternatively, Tasty can fold and fry the tortillas to make hard taco shells. The additional costs for making the taco shells are $4,200 per day, and the total daily revenues from the finished shells are $26,700. Given these figures,

A : the firm will make an additional $8,000 in income per day if it sells tortillas instead of taco shells.

B : the firm’s income will remain unchanged whether it sells tortillas or taco shells.

C : the firm will make an additional $4,200 in income per day if it sells taco shells instead of tortillas.

D : the firm will make an additional $14,500 in income per day if it sells taco shells instead of tortillas.

Explanation / Answer

So, as we can find from the above calculations that the profit is constant at $14,500 in both the options. So, the firm’s income will remain unchanged whether it sells tortillas or taco shells. So, option B is the correct option.

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