Question

Each day, Tasty Tortilla Company incurs total costs of $8,000 to process flour into tortillas. The company can sell the tortillas as is for daily revenue of $22,500. Alternatively, Tasty could fold and fry the tortillas to make hard taco shells. The additional costs for making the taco shells would be $4,200 per day, and the daily revenue from the finished shells would be $26,700. Given these data
a. the firm will make an additional $8,000 in income per day if it sells tortillas instead of taco shells.
b. the firm’s income will remain unchanged whether it sells tortillas or taco shells.
c. the firm will make an additional $4,200 in income per day if it sells taco shells instead of tortillas.
d. the firm will make an additional $14,500 in income per day if it sells taco shells instead of tortillas.

Answer 1

Answer:

c. The firm will make an additional $4200 in income per day if it sells taco shells instead of tortillas.

Explanation:

Tortilla daily revenue: $8000

Tortilla daily cost: $22500

Taco shell daily revenue: $26,700

Taco shell daily cost: $8000 + $4200 = 12200

Additional income if Taco Shells sold instead of Tortillas: $26,700 - 22,500 = $4200