Sanchez Sweets is in the process of preparing a production cost budget for May.

Actual costs in April are given in the table below based on 7,000 batches

Ingredients cost $7,500 The company is currently producing and selling batches .... 80,000

Rent $2,100 of cookies annually. The average selling price per batch is: $8.30

Labor cost $3,700 The company is considering lowering the price to: .......... $7.60

Depreciation $1,000 per batch. Management estimates this will increase

Other fixed costs $800 annual sales by........................................ ............ 10,000

Total $15,100 batches. Ingredients and labor are the only variable costs.

Q5

What is the incremental cost associated with

producing an extra 10,000 batches of cookies?

Q6

What is the incremental revenue associated

with the price reduction?

Q7

Is it profitable for Sanchez Sweets to lower the price

of its cookies? If Yes enter 1 or if No enter 2

Q8

If you answered Yes to Q7, what is the net increase in profits?