Question

Baby Burr Corporation's relevant range of activity is 6,000 units to 11,000 units. When it produces and sells 8,000 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	7.00
Direct labor	$	3.60
Variable manufacturing overhead	$	1.90
Fixed manufacturing overhead	$	13.80
Fixed selling expense	$	2.50
Fixed administrative expense	$	2.20
Sales commissions	$	0.70
Variable administrative expense	$	0.60

Required:

a. For financial reporting purposes, what is the total amount of product costs incurred to make 8,000 units? (Do not round intermediate calculations.)

b. If 10,000 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.)

c. If 10,000 units are sold, what is the total amount of variable costs related to the units sold? (Do not round intermediate calculations. Round "Per unit" answer to 2 decimal places.)

d. If the selling price is $18.60 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.)

e. What incremental manufacturing cost will the company incur if it increases production from 8,000 to 8,001 units? (Round "Per unit" answer to 2 decimal places.)

Answer 1