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Consider the production cost information for Mama Italiano Sauce given below:
Mama Italiano 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 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.60 per jar. Suppose this action will increase sales to 316,500 jars of sauce. What is the incremental revenue associated with the price reduction of sauce?
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