Question
1 ) Consider the production cost information for Mama Italiano Sauce given below: Mama Italian Sauce Production Cost Budget April 2008 Production - Jars of
1 ) Consider the production cost information for Mama Italiano Sauce given below:
| Mama Italian 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 sellingjars of sauce 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. What is the incremental costs associated with producing an extra 53,000 jars of sauce?
2)
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 321,000 jars of sauce. What is the incremental revenue associated with the price reduction of sauce?
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Microeconomics: An Intuitive Approach With Calculus
Authors: Thomas Nechyba
2nd Edition
1305650468, 978-1305650466
