Page 8 33. New Age Makeup produces face cream. Each bottle of face cream costs $
ID: 2420355 • Letter: P
Question
Page 8
33.
New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.
A)
Face cream must be processed further because its profit is $9 each.
B)
Face cream must not be processed further because costs increase more than revenue.
C)
Face cream must not be processed further because it decreases profit by $1 each.
D)
Face cream must be processed further because it increases profit by $3 each.
Explanation / Answer
A)
Face cream must be processed further because its profit is $9 each is the right answer as the profits on sale of sunscreen would be (23-14 ) = $9 each, whereas the profit on cream was $3 each bottle; the profit increase by $6 each bottle whereas the additional cost is $4 resulting in a net benefit of $2 each bottle.
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