Consider the production cost information for Mama Italiano Sauce given below:Mama Italian SauceProduction Cost BudgetApril 2008Production - Jars of sauce20,000Ingredient cost (variable)$16,000Labor cost (variable)9,000Rent (fixed)4,000Depreciation (fixed)6,000Other (fixed)1,000Total$36,000The 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 is the incremental costs associated with producing an extra 55,250 jars of sauce?Round to two decimal places.

Total cost in case of 20,000 units of jars is $36,000 In which Variable cost are : Ingredient cost…

Answered: Consider the production cost…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 16E

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Consider the production cost information for Mama Italiano 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 is the incremental costs associated with producing an extra 55,250 jars of sauce?

Round to two decimal places.

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