Question

Required information Cost Classifications (Algo) [The following information applies to the questions displayed below.] Kubin Company's relevant range of production is 12,000 to 16,000 units. When it produces and sells 14,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average cost per Unit $7.30 $4.30 $1.80 $5.30 $3.80 $2.80 $1.30 $0.80 Exercise 1-10 (Algo) Differential Costs and Sunk Costs [LO1-5) Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 14,000 to 14,001 units? 2. What is the incremental cost incurred if the company increases production and sales from 14,000 to 14,001 units? 3. Assume that Kubin Company produced 14,000 units and expects to sell 13,770 of them. If a new customer unexpectedly emerges and expresses interest in buying the 230 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 14,000 units and expects to sell 13,770 of them. If a new customer unexpectedly emerges and expresses interest in buying the 230 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

1. Incremental manufacturing cost incurred if company increases production from 14000 units to 14001 units:

Icremental production units = 1 unit

The varaible manufacturing cost for producing that one additional unit is incremetal manufacturing cost.

Direct materials	$7.30
Direct labor	$4.30
Variable manufacturing overhead	$1.80
Incremental manufacturing cost	$13.40

2. Incremental Cost incurred if company increases production from 14000 unitsto 14001 units:

Icremental production units = 1 unit

The total variable cost for producing that one additional unit is incremetal manufacturing cost.

Direct materials	$7.30
Direct labor	$4.30
Variable manufacturing overhead	$1.80
Sales commision	$1.30
Varaible administrative expense	$0.80
Incremental manufacturing cost	$15.50

3. Incremental manufacturing cost per unit incurred to sell these 230 extra units to the customer.

Total units produced = 14000 units

Expected units to be sold = 13770 units

That implies, Remaining units = 230 units

Now, if a new customer willing to buy 230 units from kubin co., there is no need to manufacture additional units since the company already have 230 units on which the manufacturing cost was incurred already.

Therefore,

Incremental manufacturing cost per unit is $0, Since the cost is already incurred on those 230 units.

4. Incremental selling and administrative cost per unit incurred to sell the 230 extra units:

Variable administrative expense	$0.80
Sales commission	$1.30
Incremental selling & administrative cost per unit	$2.10

_____×_____

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HAPOY CHEGGING.