A local vendor at the county fair sells snow cones for $3 each.When 250 snow cones are sold,each snow cone is estimated to have $.10 in variable costs and $.15 in fixed costs.A local school group plans on attending the fair next week and wishes to purchase 50 snow cones for $.25 each.The vendor can sell as many as 400 snow cones per day.If the special order were accepted,net income would:

Question

Quizplus · Accepted Answer

The total cost per snow cone is $0.25 ($0.10 variable cost + $0.15 fixed cost). Selling 50 snow cones at that price would result in $12.50 of revenue. The additional cost incurred by selling these 50 snow cones would be $5 ($0.10 variable cost x 50 snow cones). Therefore, the net income would increase by $7.50 ($12.50 in revenue - $5 in additional cost).

Selling 50 additional snow cones would not exceed the vendor's daily capacity of 400 snow cones, so there would be no lost sales. Therefore, accepting the special order would result in an increase in net income.

A Local Vendor at the County Fair Sells Snow Cones