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Question
A company produces 1,000 packs of chicken feed per month. Sales price is $4.00 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. At what price for the new product will the two alternatives (sell as is or process further) produce the same operational income? (Please round to nearest cent.)
A) $5.00
B) $4.76
C) $3.99
D) $4.40
Answer
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