Miguel Alvarez in the accounting department at Baumer Company has provided the following information: Cost per Unit Cost per Period
Direct materials $6.25
Direct labor $3.20
Variable manufacturing overhead $1.20
Fixed manufacturing overhead $13,200
Sales commissions $1.20
Variable administrative expense $0.50
Fixed selling and administrative expense $3,300

The incremental manufacturing cost that the company will incur if it increases production from 5,500 to 5,501 units is closest to:

The incremental manufacturing cost that the company will incur if it increases production from 5,500 to 5,501 units is closest to $10.65.

Here, the fixed cost would not be relevant for the computation.

Incremental manufacturing cost when production level changed is

= Direct material cost per unit + Direct labor cost per unit + Variable manufacturing overhead per unit

= $6.25 + $3.20 + $1.20

= $10.65

In conclusion, the incremental manufacturing cost that the company will incur if it increases production from 5,500 to 5,501 units is closest to $10.65.

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