Consider the production cost information for santiagos

Reference no: EM13598682

Santaigo's Salsa
- Production Costs
- April 2008
Production 20,000 Jars of Salsa
Ingredient cost (variable) $16,000
Labor cost (variable) $9,000
Rent (fixed) $4,000
Depreciation (fixed) $6,000
Other (fixed) $1,000

Consider the production cost information for Santiago's Salsa. The company is currently producing and selling 250,000 jars of salsa annually. The jars sell for $4.00 each. The company is considering lowering the price to $3.70. Suppose this action will increase sales to 300,000.

a. What is the incremental cost associated with producing an extra 50,000 jars of salsa?
b. What is the incremental revenue associated with the price reduction to $0.30 per jar?
c.Should Santiago's lower the price of its salsa?

Reference no: EM13598682

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