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Joe's Soup Plant Is Running at 52% of Its Monthly

Question 41

Multiple Choice

Joe's Soup plant is running at 52% of its monthly capacity. Joe's Soup plant has just received a special order to produce 400 cases of mushroom noodle soup for a statewide supermarket. The supermarket will sell the soup under its own private brand label. The soup will be the same in all respects, except for the label, which will cost Joe's Soup plant an extra $500 in total to design. The supermarket has offered to pay only $19.00 per case, which is well under Joe's normal sales price.
Costs at the current production level (450 cases) are as follows:
Joe's Soup plant is running at 52% of its monthly capacity. Joe's Soup plant has just received a special order to produce 400 cases of mushroom noodle soup for a statewide supermarket. The supermarket will sell the soup under its own private brand label. The soup will be the same in all respects, except for the label, which will cost Joe's Soup plant an extra $500 in total to design. The supermarket has offered to pay only $19.00 per case, which is well under Joe's normal sales price. Costs at the current production level (450 cases)  are as follows:   If Joe's Soup plant accepts the offer, profits will: A)  Decrease by $1,100 B)  Increase by $1,600 C)  Decrease by $1,600 D)  Increase by $1,100 If Joe's Soup plant accepts the offer, profits will:


A) Decrease by $1,100
B) Increase by $1,600
C) Decrease by $1,600
D) Increase by $1,100

Correct Answer:

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