Current Attempt in Progress

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

Sunland’s Salsa
Production Costs
April 2020
Production20,000
Jars of Salsa
Ingredient cost (variable)$12,000   
Labor cost (variable)8,400   
Rent (fixed)5,000   
Depreciation (fixed)6,000   
Other (fixed)1,000   
   Total$32,400   

(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.

Sunland’s Salsa
Budgeted Production Costs
May 2020
Production24,000
Jars of Salsa
Ingredient cost$enter a dollar amount    
Labor costenter a dollar amount   
Rententer a dollar amount   
Depreciationenter a dollar amount   
Otherenter a dollar amount
Total$enter a total dollar amount 

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:

Ingredients cost$ 7,200
Rent1,100
Labor cost3,300
Depreciation900
Other fixed costs700
Total$13,200


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.)

Incremental cost$enter incremental cost in dollars 

What is the incremental revenue associated with the price reduction?

Incremental revenue$enter incremental revenue in dollars 

Should Sanchez Sweets lower the price of its cookies?

select an option                                  , lowering the price will result in incremental select an option                                   of $enter a dollar amount  .

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

Numbers of cars detailed2,080
Revenue$468,000
Less operating expenses:
   Supplies (polish, wax, etc.)$5,824
   Salaries of detailers104,000
   Water and other variable costs12,480
   Supervisor’s salary65,000
   Rent36,000
   Depreciation5,000
   Other fixed costs1,050229,354
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.

(a)

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

Annual incremental revenue$enter a annual incremental revenue in dollar 

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Solution

(b)

Calculate the incremental cost associated with being open on Saturday.

Incremental cost$enter incremental cost in dollar 

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

Carla Vista’s Salsa
Production Costs
April 2020
Production30,000
Jars of Salsa
Ingredient cost (variable)$21,000   
Labor cost (variable)14,400   
Rent (fixed)4,300   
Depreciation (fixed)6,900   
Other (fixed)1,500   
   Total$48,100   


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?

Incremental Cost$enter incremental cost in dollar 

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