Question

New age make up produces face cream. Each bottle of the face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. The company could sell the sunscreen bottles for $23 each. What should New Age make up do?

Answer 1

New Age Makeup should sell the face cream as-is, as the profit per bottle is higher ($3) compared to processing it further into sunscreen, which would result in a net loss of $1 per bottle.

Step-by-step explanation:

The decision New Age Makeup faces whether to sell its face cream as-is or to process it further into sunscreen involves analyzing the costs and revenues associated with both options. The face cream costs $10 to produce and sells for $13, resulting in a profit of $3 per bottle.

If processed into sunscreen, the additional cost is $14 per bottle and the selling price is $23, yielding a profit of $9 per bottle minus the original $10 production cost, leading to a net profit of -$1. Therefore, it's financially more beneficial for the company to sell the face cream as-is rather than processing it further into sunscreen.