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What is the incremental cost

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Problem -Consider the production cost information for Santiago's Salsa in Problem. The company is currently producing and selling 325,000 jars of salsa annually. The jars sell for $5.00 each. The company is considering lowering the price to $4.60. Suppose the action will increase sells to 375,000 jars.

Santiagos's Salsa Production Costs April 2011

Production                                          Jars of Sala

Ingredient cost (variable)                     $20,000

Labor cost (variable)                           12,000

Rent (fixed)                                        5,000

Depreciation (fixed)                            6,000

Other (Fixed)                                     1,000

Total                                                 $44,000

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 of $0.40 per jar?

C. Should Santago's lower the price of its salsa?

Reference no: EM131802299

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