Assume that EAT is currently selling only 50,000 heads of fruits per year instead of 60,000. Under this scenario, what will be EAT’s increase/decrease in profit for the year if he chooses to sell it a whole instead of slicing up the fruit?
EAT's Fruit Stand currently sells 60,000 heads of fruit each year for P1.00 per fruit. EAT is thinking of expanding operations and serving the customer better by purchasing a “slice and dice” machine that will cut up each head of fruit into bite-size pieces. EAT expects he will then be able to sell his fruits for P1.70 per head. EAT has prepared the following analysis for each option based on sales of 60,000 heads of fruits.
|
Selling Unsliced Fruit: |
Per Head |
Total |
|
Variable costs |
P0.25 |
P15,000 |
|
Fixed Costs |
0.30 |
18,000 |
|
Total |
P0.55 |
P33,000 |
|
Selling Sliced Fruit: |
Per Head |
Total |
|
Variable costs |
P0.30 |
P18,000 |
|
Fixed Costs |
0.90 |
54,000 |
|
Total |
P1.20 |
P72,000 |
Assume that EAT is currently selling only 50,000 heads of fruits per year instead of 60,000. Under this scenario, what will be EAT’s increase/decrease in profit for the year if he chooses to sell it a whole instead of slicing up the fruit?
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