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The production cost information for Santiagos Salsa is as follows: Santiagos Salsa Production Costs April 2014 25,000 Production Jars of Salsa Ingredient cost (variable) $21,000
The production cost information for Santiagos Salsa is as follows:
Santiagos Salsa Production Costs April 2014 | ||||
25,000 | ||||
Production | Jars of Salsa | |||
Ingredient cost (variable) | $21,000 | |||
Labor cost (variable) | 13,250 | |||
Rent (fixed) | 4,400 | |||
Depreciation (fixed) | 5,900 | |||
Other (fixed) | 1,500 | |||
Total | $46,050 |
The company is currently producing and selling 350,000 jars of salsa annually. The jars sell for $5.00 each. The company is considering lowering the price to $4.60. Suppose this action will increase sales to 425,000 jars.
What is the incremental cost associated with producing an extra 75,000 jars of salsa?
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