John Boyd Corporation manufactures and sells 1,000 tractors each month. The prim

Question

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below:


Direct materials $34
Direct labor $26
Variable manufacturing overhead $39

Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $17,000. Joan Reid, Inc. has offered to purchase 100 motors from John Boyd per month to be used in its own outboard motors.

What is the incremental cost of producing each additional motor?

Explanation / Answer

Incremental cost is 34 + 26 + 39 = $99

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.