Pet Snacks Company has 500 kg of liver-flavored dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.00 to $2.50 per kg. Or, they could be cheese-coated and sold for $4.00 per kg; the additional processing cost would be $0.50 per kg. Cheese-coated biscuits sell very well. Which alternative probably has less uncertainty concerning volume of sales?

Question

Quizplus · Accepted Answer

Adding cheese coating to the dog biscuits may increase the demand as the cheese-coated variant is selling well. This might result in a higher volume of sales compared to the reduced price of liver-flavored biscuits. Additionally, the increased cost from the cheese-coating is only $0.50 per kg which is a small amount compared to the potential increase in revenue. Therefore, the cheese-coating alternative is likely to have less uncertainty concerning volume of sales.

Pet Snacks Company Has 500 Kg of Liver-Flavored Dog Biscuits