Kubin Companys relevant range of production is 21000 to 2500

Kubin Company\'s relevant range of production is 21,000 to 25,000 units.When it produces and sells 23,000 units, its average costs per unit are as follows: Amount per Unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $ 8.10 5.10 2.60 $ 6.10 $ 4.60 $ 3.60 2.10 1.60 Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 23,000 to 23,001 units? what is the incremental cost incurred if the company increases production and sales from 23,000 to 23,001 units? 3. Assume that Kubin Company produced 23,000 units and expects to sell 22,690 of them. If a new customer unexpectedly emerges and expresses interest in buying the 310 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 23,000 units and expects to sell 22,690 of them. If a new customer unexpectedly emerges and expresses interest in buying the 310 extra units that have been produced by the company and that would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?

Solution

I)incremental manufacturing cost for producing incremental 1 units =direct material+ direct labor +variable overhead

    = 8.10+5.10+2.6

    = $ 15.8

2)Incremental total cost : Incremental manufacturing cost+ Incremental variable administration + sales commission

     = 15.8+1.6+2.1

     = $ 19.50

3)Incremental manufacturing cost incurred to sell unsold units = 0 as there will be no manufacturing cost (units are already manufactured)

4)Incremental selling and administrative cost per unit = 2.10+1.6 =$ 3.7 per unit