Ask Question
23 May, 13:50

The following information relates to a product produced by Creamer Company:

Direct materials

$24

Direct labor

15

Variable overhead

30

Fixed overhead

18

Unit cost

$87

Fixed

selling costs are $500,000 per year, and variable selling costs are $12 per unit sold. Although production capacity is 600,000 units per year, the company expects to produce only 400,000 units next year. The product normally sells for $120 each. A customer has offered to buy 60,000 units for $90 each.

The incremental cost per unit associated with the special order is

Select one:

a. $84

b. $81

c. $69

d. $64

+1
Answers (1)
  1. 23 May, 16:42
    0
    B. $81

    Explanation:

    The incremental cost is the cost of producing an additional unit of output. Incremental costs always comprise of variable costs i. e. costs that fluctuate with changes in the level of output. For example, raw materials, packaging, direct labor and utilities. Understanding of incremental costs is important to boost efficiency and profitability. In the current situation, it is calculated as:

    Direct materials: $24

    Direct labor: $15

    Variable overhead: $30

    Variable selling costs: $12

    Incremental cost per unit associated with special order: $24 + $15 + $30 + $12 = $81
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The following information relates to a product produced by Creamer Company: Direct materials $24 Direct labor 15 Variable overhead 30 Fixed ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers