Question

Kubin company’s relevant range of production is 16,000 to 24,500 units. When it produces and sells 20,250 units, its average costs per unit are as follows:.

Answer 1

Based on the details given, the following are true:

• 1. Incremental manufacturing cost = $14.60
• 2. Incremental cost = $17.50

Incremental manufacturing cost if production increased from 20,250 to 20,251

The fixed cost will not change as the production amount is still below 24,500 units. Incremental manufacturing cost will therefore be:

= Direct material + Direct labor + Variable overhead

= 7.70 + 4.70 + 2.20

= $14.60

Incremental cost for increased from 20,250 to 20,251

This will include all costs that are not fixed.

= Incremental manufacturing cost + Sales commissions + Variable admin expense

= 14.60 + 1.70 + 1.20

= $17.50

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