Carrie Dunn Is the Owner and Operator of Dunn's Best

question 107

Essay

Carrie Dunn is the owner and operator of Dunn's Best Jams,which she sells at craft festivals.She makes and sells only three types of jams-pecan pie jam,chocolate pie jam,and lemon tart jam.The joint costs of leasing her professional kitchen for manufacturing,travel to craft shows,insurance,and so on are allocated on an equal basis to the three types of jams sold.Last year's sales figures and allocated joint costs follow.Should Dunn's Best Jams stop selling its pecan pie jam? Why or why not?
$\begin{array}{c}\begin{array}{l}\\\\\text { Sales}\\\text { Less: Cost of goods sold}\\\text { Gross margin}\end{array}\begin{array}{c}\text {Pecan Pie Jam}\\\\\$ 4,000 \\\underline{5,000} \\( \$ 1,000)\end{array}\begin{array}{c}\text {Chocolate Pie}\\\text { Jam } \\\$ 8,000 \\\underline{5,000} \\ \$ 3,000 \end{array}\begin{array}{c}\text {Lemon Tart Jam}\\\\\$ 9,000 \\\underline{5,000}\\\$ 4,000\end{array}\end{array}$

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Definitions:

Units

Basic quantities or measurements used to express variables in various contexts, such as items, people, or currency.

Labor Demand Curve

A graphical representation showing the quantity of labor that firms are willing and able to hire at different wage levels, typically downward sloping.

Imperfectly Competitive

A market structure where individual sellers have some control over the market price due to product differentiation or other factors.

Purely Competitive

A market structure with many sellers offering identical products, leading to no individual influence on price by single sellers.