Consider the production cost information for Mama Italian Sauce given below:

Mama Italian 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

The company is currently producing and selling jars of sauce the jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.70 per jar. Suppose this action will increase sales. What are the incremental costs associated with producing an extra 63,500 jars of sauce?

Answer rating: 100% (QA)

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