Corner Cupcakes Co. has two new bakery products to consider marketing. The first product, a Mango Munchie, is expected to be sold for $4.00 each with a related product cost of $1.50 per unit. The projected sales in units for the Mango Munchie is 2,000 per month. The second product is a Cosmo Cookie, which will sell for $3.50 each with a related product cost of $1.30 per unit. The projected sales in units for the Cosmo Cookie is 2,500 per month. Assuming that Corner Cupcakes Co. can only select one of these new bakery products to market and sell, which product should it select and why?
A) Mango Munchie should be sold since it has the lowest total cost to produce.
B) Cosmo Cookie should be sold since it has the highest revenues generated from sales.
C) Cosmo Cookie should be sold since it will result in $500 of additional income to the bakery.
D) Mango Munchie should be sold since it has the lowest cost per unit to produce.

Question

Quizplus · Accepted Answer

Mango Munchie Profit = ($4.00 Unit Selling Price - $1.50 Unit Cost) = $2.50 per unit profit x 2,000 units sales = $5,000 profit; Cosmo Cookie Profit = ($3.50 Unit selling Price - $1.30 Unit Cost) = $2.20 per unit profit x 2,500 units sales = $5,500 profit; $5,500 - $5,000 = $500 difference in profit, Cosmo Cookie greater than Mango Munchie.