Question

Kesterson Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 6.75 Direct labor $ 3.40 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 25,200 Sales commissions $ 1.30 Variable administrative expense $ 0.30 Fixed selling and administrative expense $ 6,300 The incremental manufacturing cost that the company will incur if it increases production from 10,500 to 10,501 units is closest to:

Kesterson Corporation has provided the following information. What is the incremental manufacturing cost if the company increases production from 10,500 to 10,501 units?

a) $6.75
b) $3.40
c) $1.70
d) $0.30

Answer 1

The incremental manufacturing cost for Kesterson Corporation when increasing production by one unit is the sum of the variable costs: direct materials, direct labor, and variable manufacturing overhead, which totals to $11.85.

Step-by-step explanation:

The incremental manufacturing cost represents the additional cost incurred for producing one extra unit of product. For Kesterson Corporation, the fixed manufacturing overhead, such as the provided $25,200, will not change with the production of one extra unit, so it is not considered in the incremental cost. The incremental manufacturing cost includes only the variable costs that will change with the production increase.

When production is increased by one unit, from 10,500 to 10,501 units, the incremental costs that will be added are:

• Direct materials: $6.75
• Direct labor: $3.40
• Variable manufacturing overhead: $1.70

Therefore, the total incremental manufacturing cost for one additional unit would be:

$6.75 (Direct materials) + $3.40 (Direct labor) + $1.70 (Variable manufacturing overhead) = $11.85