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Unformatted text preview: with increases in volume. Jiambalvo Managerial Accounting P2. LO 5 and 6 a. The variable costs are $1.25 per jar of salsa as follows: 20,000 Production Jars of Salsa Ingredient cost $16,000 Labor cost 9,000 Total $25,000 $25,000 20,000 jars of salsa = $1.25 per jar of salsa. Thus, the incremental cost of producing an extra 50,000 jars of salsa is $62,500 (i.e., $1.25 50,000). b. The incremental revenue associated with a price reduction of $0.30 is $110,000 as follows: Original Revenue (250,000 $4.00) $1,000,000 Revenue with price change (300,000 $3.70) 1,110,000 Incremental revenue associated with price change $ 110,000 c. The price should be lowered since the incremental cost of this action ($62,500 in part a) is less than the incremental revenue ($110,000 in part b). 1-2...
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