Question

Fiori Corporation's relevant range of activity is 4,900 units to 5,500 units. When it produces and sells 5.200 units, its average costs per unit are as follows Average Cost per Unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $ 7.00 $ 3.70 $ 2.05 $ 3.00 $ 1.35 $ 1.25 1.70 s 1.20 The incremental manufacturing cost that the company will incur if it increases production from 4,500 to 4,501 units is closest to

Answer 1

If the production is increased from 4,500 units to 4,501 units, then for that 1 unit the incremental manufacturing cost will include only the variable manufacturing costs.

$\therefore$Incremental manufacturing cost = ( Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per unit ) * Increase in units of production = ( $7 + $3.7 + $2.05 ) * 1 unit = $12.75