Question

Publix has 2,700 pounds of bananas with a total cost of $864. Because the bananas have become too ripe, Publix is contemplating whether it should use the bananas to bake banana bread or sell the bananas ‘as is’ to the homeless center for $1,485. In addition to the cost of the bananas, it would cost $2,565 to convert the bananas into bread, which could then be sold for a total of $4,480. However, a special oven to bake the bread will have to be rented for an additional $300. What is the incremental effect on income if Publix converts the bananas to banana bread?

Answer 1

Answer: an increment in profit $1615

Explanation:

2700 pounds of Banana

Total cost = $864

If sold = $1485

When converted into bread $2565 and sold at the cost of $4480

Oven rentage = $300

What is the incremental effect on income if Publix converts the bananas to banana bread?

Sales Amount - Expenses incurred

= $4480 - $2565 + $300

= $4480 - $2865

= $1615

If he had sold the bananas

Sales amount - cost amount

= $1485 - $864

= $621

By converting the bananas to bread the incremental effect on income is it would yield more profits at $1615 compared to when sold at which is $621