Question

Fiori Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.05 Direct labor $ 3.05 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 3.00 Fixed selling expense $ 0.50 Fixed administrative expense $ 0.40 Sales commissions $ 1.00 Variable administrative expense $ 0.50 The incremental manufacturing cost that the company will incur if it increases production from 5,000 to 5,001 units is closest to: $16.20 $10.80 $13.80 $14.30

Answer 1

Answer:

$13.80

Explanation:

Variable costs:

Directmaterial cost                            $6.05

Direct labor                                        $3.05

Variable manufacturing overhead   $ 1.70

Variable manufacturing overhead   $ 3.00

Total variable cost                           $13.80

All the additional cost incurred to manufacture each extre unit will be incremental manufacturing cost of the 5,001th unit. So, the correct answer $13.80.