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Incremental Costs

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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

Ingredient cost (variable)

Labor cost (variable)

Rent (fixed)

Depreciation (fixed)

Other (fixed)


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 $3.70 per jar. Suppose this action will increase sales to 300,000 jars of sauce. What are the incremental costs associated with producing an extra 58,250 jars of sauce?

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