Question

Kesterson Corporation has provided the following information:

	Cost per Unit		Cost per Period
Direct materials	$	6.60
Direct labor	$	3.90
Variable manufacturing overhead	$	1.55
Fixed manufacturing overhead			$	27,900
Sales commissions	$	1.90
Variable administrative expense	$	0.60
Fixed selling and administrative expense			$	7,200

The incremental manufacturing cost that the company will incur if it increases production from 9,000 to 9,001 units is closest to:

Answer 1

The incremental manufacturing cost: $ 12.05

Working notes for the above answer is as under

Manufacturing cost will include those cost which is related to the production of the units that is:

Direct material

Direct variable cost and

Variable manufacturing cost

So incremental Analysis will consider the variable cost because the fixed price will remain the same at any level of production

Particulars	Per unit $
Direct Material	6.6
Direct Cost	3.9
Variable manufacturing overhead	1.55
Total Incremental Manufacturing cost	12.05