Question
I am trying to figure out variable cost per jar, total variable cost at current production and number of jars of salsa. The wording on
I am trying to figure out variable cost per jar, total variable cost at current production and number of jars of salsa. The wording on the document is what is throwing me off.
Santiago's SalsaProduction Costs April 2020
Production - Jars of salsa25,000
Ingredient cost (variable)$20,000
Labor cost (variable)12,000
Rent (fixed)5,000
Depreciation (fixed)6,000
Other (fixed)1,000
Total$44,000
The company is currently producing and selling325,000jars of salsa annually. The salsa sellsfor$5.00each. The company is considering lowering the price to$4.60. Supposethe action will increase sales to375,000jars of salsa.
Variable costs per jar:
Ingredient cost
Labor cost
Total variable cost at current production$-
Number of jars of salsa
Variable cost per jar at current production$1.28
Incremental number of jars50,000
Incremental cost associated with price change$64,000
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