Reference no: EM132824048

Sanchez Sweets is in the process of preparing a production cost budget for May. Actual costs in April for production of 7,000 batches of cookies were:

Ingredients cost       $ 7,200
Rent                         1,100
Labor cost                3,300
Depreciation                  900
Other fixed costs               700
Total                              $13,200

The company is currently producing and selling 80,000 batches of cookies annually with each batch sold for $8.00. The company is considering lowering the price to $7.50 per batch for which management estimates this will increase sales to 90,000 batches. Ingredients and labor are the only variable costs.

problem 1: What is the incremental cost associated with producing an extra 10,000 batches of cookies?