Dozier Company produced and sold 1,000 units during its first month of operation

Question

Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month:

Required:

5. With respect to cost classifications for decision making:

a. If Dozier had produced 1,001 units instead of 1,000 units, how much incremental manufacturing cost would it have incurred to make the additional unit?

Direct materials $ 74,000 Direct labor $ 37,500 Variable manufacturing overhead $ 17,000 Fixed manufacturing overhead 29,500 Total manufacturing overhead $ 46,500 Variable selling expense $ 13,000 Fixed selling expense 20,000 Total selling expense $ 33,000 Variable administrative expense $ 4,500 Fixed administrative expense 26,000 Total administrative expense $ 30,500

Explanation / Answer

Incremental manufacturing cost for the additional unit :

$128.50 incremental manufacturing cost would it have incurred to make the additional unit.

Direct material 74000 Direct labour 37500 Variable manufacturing overhead 17000 Total variable manufacturing cost 128500 Variable manufacturing cost per unit (128500/1000) 128.50

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