Question

Kubin Company’s relevant range of production is 14,000 to 20,500 units. When it produces and sells 17,250 units, its average costs per unit are as follows:

Direct materials	$	7.50
Direct labor	$	4.50
Variable manufacturing overhead	$	2.00
Fixed manufacturing overhead	$	5.50
Fixed selling expense	$	4.00
Fixed administrative expense	$	3.00
Sales commissions	$	1.50
Variable administrative expense	$	1.00

Required:

1. What is the incremental manufacturing cost incurred if the company increases production from 17,250 to 17,251 units?

2. What is the incremental cost incurred if the company increases production and sales from 17,250 to 17,251 units?

3. Assume that Kubin Company produced 17,250 units and expects to sell 17,000 of them. If a new customer unexpectedly emerges and expresses interest in buying the 250 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 17,250 units and expects to sell 17,000 of them. If a new customer unexpectedly emerges and expresses interest in buying the 250 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?

Answer 1