[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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