Consider the production cost information for Mama Italiano Sauce given below: Ma
ID: 2643317 • Letter: C
Question
Consider the production cost information for Mama Italiano Sauce given below:
Mama Italiano Sauce
Production Cost Budget
April 2008
Production - Jars of sauce
20,000
Ingredient cost (variable)
$16,000
Labor cost (variable)
9,000
Rent (fixed)
4,000
Depreciation (fixed)
6,000
Other (fixed)
1,000
Total
$36,000
The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.60 per jar. Suppose this action will increase sales to 324,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce?
Your Answer:
Mama Italiano Sauce
Production Cost Budget
April 2008
Production - Jars of sauce
20,000
Ingredient cost (variable)
$16,000
Labor cost (variable)
9,000
Rent (fixed)
4,000
Depreciation (fixed)
6,000
Other (fixed)
1,000
Total
$36,000
Explanation / Answer
Incremental revenue = New sales*New Price - Old sales*Old price = 324,000*3.6 - 250000*4 = $166400
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.