Current Attempt in Progress

Sunland’s Salsa is in the process of preparing a production cost budget for May. Actual costs in April were:

(a)

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Using this information, prepare a budget for May. Assume that production will increase to 24,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign.

2. Current Attempt in Progress

The Riverview Hotel is a deluxe four-star establishment. Late on Friday, it had 20 of its 300 rooms available when the desk clerk received a call from the Pines Hotel. The Pines Hotel made a booking error and did not have room for 4 guests (each of whom had a “confirmed” room). The Pines wants to send its customers to the Riverview but pay the rate the guests would have been charged at the Pines (\$160 per room) rather than paying the normal rate of \$310 per room at the Riverview.
(a)

If the Riverview accepts the guests, what will be the incremental revenue?

3. Current Attempt in Progress

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:

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.

What is the incremental cost associated with producing an extra 10,000 batches of cookies? (Do not round intermediate calculations, round final answer to 0 decimal places, e.g. 2,520.)

What is the incremental revenue associated with the price reduction?

Should Sanchez Sweets lower the price of its cookies?

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

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.

(a)

Calculate the annual incremental revenue associated with being open on Saturday.

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Assistance Used

Solution

(b)

Calculate the incremental cost associated with being open on Saturday.

5. The production cost information for Carla Vista’s Salsa is as follows:

The company is currently producing and selling 330,000 jars of salsa annually. The jars sell for \$8.00 each. The company is considering lowering the price to \$7.40. Suppose this action will increase sales to 390,000 jars.

(a)

What is the incremental cost associated with producing an extra 60,000 jars of salsa?

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