Use the following to answer questions 1-2:

Jebb's Lettuce Stand currently sells 60,000 heads of lettuce each year for $1.00 per head. Jebb

is thinking of expanding operations and serving the customer better by purchasing a slice and dice machine that will cut up each head of lettuce into bite-size pieces that can be used for salads. Jebb expects he will then be able to sell his lettuce for $1.70 per head. Jebb has

prepared the following analysis for each option based on sales of 60,000 heads of lettuce:

Selling Unsliced Lettuce:

Per Head Total

Variable costs ................................ $0.25 $15,000

Fixed costs ..................................... 0.30 18,000

Total .............................................. $0.55 $33,000

Selling Sliced Lettuce:

Per Head Total

Variable costs ................................ $0.30 $18,000

Fixed costs ..................................... 0.90 54,000

Total .............................................. $1.20 $72,000

1. Based on the information above, what will be Jebb's increase or decrease in profit for

the year if he chooses to start slicing up the lettuce instead of selling it whole? ABCD

A) $3,000 increase

B) $3,000 decrease

C) $12,000 decrease

D) $30,000 increase

2. Assume that Jebb is currently selling only 50,000 heads of lettuce per year instead of

60,000. Under this scenario, what will be Jebb's increase or decrease in profit for the

year if he chooses to start slicing up the lettuce instead of selling it whole? ABCD

A) $2,000 increase

B) $2,500 decrease

C) $3,000 increase

D) $3,500 decrease