A local vendor at the county fair sells snow cones for $3 each. When 250 snow cones are sold, each snow cone is estimated to have $.10 in variable costs and $.15 in fixed costs. A local school group plans on attending the fair next week and wishes to purchase 50 snow cones for $.25 each. The vendor can sell as many as 400 snow cones per day.

If the special order were accepted, net income would:

Question

Business

Stout

5 November, 11:50

A local vendor at the county fair sells snow cones for $3 each. When 250 snow cones are sold, each snow cone is estimated to have $.10 in variable costs and $.15 in fixed costs. A local school group plans on attending the fair next week and wishes to purchase 50 snow cones for $.25 each. The vendor can sell as many as 400 snow cones per day.

If the special order were accepted, net income would:

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Answers (1)

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Reid · Answer 1

Effect on income = $7.5 increase

Explanation:

Giving the following information:

When 250 snow cones are sold, each snow cone is estimated to have $.10 in variable costs and $.15 in fixed costs.

Offer = 50 snow cones for $.25 each.

Because it is a special offer and there is unused capacity (I assume that the vendor sells 250 units), we will not take into account the fixed costs.

Effect on income = 50 * (0.25-0.10) = $7.5 increase