DiCarlo crafts local pottery. The cost of getting the pottery ready for market i
ID: 2514583 • Letter: D
Question
DiCarlo crafts local pottery.
The cost of getting the pottery ready for market is about $20 per pound of clay.
Each pound of clay produces 4 unglazed pieces of art that sells for $8 per piece.
DiCarlo can glaze the clay for an additional $7. The glazed art will still produce 4 pieces of art that sells for $11 per piece.
By how much will DiCarlo's income change if they glaze 30 pounds of clay as opposed to selling them unglazed?
$510 decrease
$510 increase
$150 increase
$1320 increase
none of the above
a.$510 decrease
b.$510 increase
c.$150 increase
d.$1320 increase
e.none of the above
Explanation / Answer
The Answer is C - $150 Increase
Income earned in case of Unglazed clay
Income = Sales - Cost
= (4x$8) - $20
= $32 - $20
= $12 per piece
Income earned in case of glazed clay
= ($4 x $11 ) - ($20 + $7 )
= $44 - $27
= $17 per piece
Therefore, Incremental Net Income = $17 - $12 = $5 per clay
DiCarlo's change in income if they glaze 30 pounds of clay as opposed to selling them unglazed
= 30 x $5
= $150
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