Question

New Age Makeup produces face cream. Each bottle of 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. New Age Makeup could sell the sunscreen bottles for $23 each.

A) Face cream must be processed further because its profit is $9 each.
B) Face cream must not be processed further because costs increase more than revenue.
C) Face cream must not be processed further because it decreases profit by $1 each.
D) Face cream must be processed further because it increases profit by $3 each.

Answer 1

Face cream must not be processed further because costs increase more than revenue.

Step-by-step explanation:

Profit = Total revenue - Total cost

If sold as face cream, total profit = $13 - $10 = $3

If processed into sunscreen , total cost = $10 + $14 = $24

Profit = $24 - $23 = $1

The profit from selling the product as a face cream is greater than the profit of developing it to a face cream. So the product shouldn't be developed further.

I hope my answer helps you