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:
Average Cost per Unit
Direct materials
$ 7.30
Direct labor
$ 4.30
Variable manufacturing overhead
$ 1.80
Fixed manufacturing overhead
$ 5.30
Fixed selling expense
$ 3.80
Fixed administrative expense
$ 2.80
Sales commissions
$ 1.30
Variable administrative expense
$ 0.80
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?