Animal Treats Company has 500 kg of liver-flavoured dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.10 to $2.65 per kg. Or, they could be cheese-coated and sold for $4.25 per kg; the additional processing cost would be $0.40 per kg. Cheese-coated biscuits sell very well. Which alternative probably has less uncertainty concerning volume of sales?

Question

Quizplus · Accepted Answer

Cheese-coated biscuits have been proven to sell well, so there is less uncertainty concerning volume of sales. Additionally, although there is an additional processing cost of $0.40 per kg, the selling price of $4.25 per kg is higher than the reduced price of liver-flavoured biscuits at $2.65 per kg, so the profit margin may be higher with the cheese-coated biscuits.

Animal Treats Company Has 500 Kg of Liver-Flavoured Dog Biscuits