Question

Assume that Kubin Company produced 30,750 units and expects to sell 30,390 of them. If a new customer unexpectedly emerges and expresses interest in buying the 360 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?

Fixed selling expense $ 5.10
Fixed administrative expense $ 4.10
Sales commissions $ 2.60
Variable administrative expense $ 2.10

Answer 1

Incremental selling and administrative cost per unit to be incurred to sell extra 30 units = Sales commissions + Variable administrative expenses = $2.60 + $2.10 = $4.70

Step-by-step explanation:

Answer 2

In order to quote a price to sell the remaining 360 units, we will have to understand that fixed selling expenses and fixed administrative expenses have already been covered by usual sales of 30390, Thus in order to produce the 360 units the organisation will incur variable expenses per unit, thus they can quote a price which is lower than what they quote normally.

In the given question the incremental selling and administrative cost will be as below:

Sales Commissions $2.6

Variable Administrative Expenses $2.10