Question
Sweet Valley Foods manufactures pastries and sells them to retailers. As a large bakery manufacturer, they were recently approached by a major retail chain to
Sweet Valley Foods manufactures pastries and sells them to retailers. As a large bakery manufacturer, they were recently approached by a major retail chain to bake them cakes to be sold to their consumers under the retailer's private label. Because Sweet Valley has never produced cakes before, they would require a new raw material, which they would need to purchase from one of their existing raw material vendors, Glaycon Inc. They determined no new equipment or labor hours would be required to produce the cakes. Glaycon Inc. calculated it would cost them $10,000 per truckload to produce and deliver the raw materials. Sweet Valley values a truckload of raw materials at $14,000 It will cost Sweet Valley $15,000 to produce 5,000 cakes The retailer placed the value of purchasing 5,000 cakes at $20,000
In the end, after negotiations, the final terms were as follows:
Sweet Valley would sell 5,000 cakes to the retailer for $18,000
Claycon Inc. would sell a truckload of raw materials to Sweet Valley for $13,000
QUESTION:
What is the seller surplus for Glaycon Inc.?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started