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Consider the production cost information for Mama Italiano Sauce given below:
Mama Italiano Sauce
Production Cost Budget
April 2008
Production - Jars of sauce 20,000
Ingredient cost (variable) $16,000
Labor cost (variable) 9,000
Rent (fixed) 4,000
Depreciation (fixed) 6,000
Other (fixed) 1,000
Total $36,000
Question 1: The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.65 per jar. Suppose this action will increase sales to 304,500 jars of sauce. What is the incremental revenue associated with the price reduction of sauce? Round to two decimal places.
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