# [Solution]Production Cost

Question #12 Sterling Auto Detail is currently open Monday through Friday. In the past year, income before taxes was as follows: Numbers of cars detailed…

Question #12
Sterling Auto Detail is currently open Monday through Friday. In the past year, income before taxes was as follows:

Numbers of cars detailed

2,080

Revenue

\$468,000

Less operating expenses:

Supplies (polish, wax, etc.)

\$5,824

Salaries of detailers

104,000

Water and other variable costs

12,480

Supervisor’s salary

65,000

Rent

36,000

Depreciation

5,000

Other fixed costs

1,050

229,354

Income before taxes

\$238,646

Quincy Davis, the owner of Sterling, is considering extending the workweek through Saturday. If he takes this action, he’ll hire a part-time employee for \$300 per day to act as the Saturday manager so the supervisor still can have Saturday off. Quincy estimates that his company will detail an additional 10 cars per Saturday, 52 weeks per year
Calculate the annual incremental revenue associated with being open on Saturday.

Annual incremental revenue

\$enter a annual incremental revenue in dollar

Question #13
The production cost information for Carla Vista’s Salsa is as follows:

Carla Vista’s Salsa Production Costs April 2020

Production

30,000 Jars of Salsa

Ingredient cost (variable)

\$27,000

Labor cost (variable)

14,400

Rent (fixed)

4,300

Depreciation (fixed)

6,200

Other (fixed)

1,900

Total

\$53,800

The company is currently producing and selling 420,000 jars of salsa annually. The jars sell for \$6.00 each. The company is considering lowering the price to \$5.50. Suppose this action will increase sales to 480,000 jars.
(a)
What is the incremental cost associated with producing an extra 60,000 jars of salsa?

Incremental Cost

\$enter incremental cost in dollar

Assignment status: Solved by our experts

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