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 $3.70 per jar. Suppose this action will increase sales to 318,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce? Round to two decimal places.
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 $3.70 per jar. Suppose this action will increase sales to 318,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce? Round to two decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 |
|
|
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 $3.70 per jar. Suppose this action will increase sales to 318,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce?
Round to two decimal places.
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