Question

Clothing Manufacturers is considering making a new article of clothing. They expect to hire an additional employee to produce the article of clothing which will cost $55,000 annually. The cost of making each article of clothing will be $33.60. If Clothing Manufacturers expects to sell 12,350 articles of clothing, then what is their incremental cost

Answer 1

Clothing Manufacturers

Their incremental cost is $55,000.

Step-by-step explanation:

a) Data and Calculations:

Expected sales unit = 12,350

Unit cost = $33.60

Total cost = $414,960 ($33.60 * 12,350)

Cost before additional employee = $359,960 ($414,960 - $55,000)

b) The incremental cost is the additional cost that was incurred in the production of 12,350 articles since an additional employee was hired. The annual cost of hiring this additional employee is $55,000 as given. This total amount represents the incremental cost for the Clothing Manufacturers.