Classic Loungers is in the process of preparing a production cost budget for August.Actual costs in July for 200 chaise lounge chairs were: $$\begin{array} { l r }
\text { Materials cost } & 6,000 \
\text { Labor cost } & 8,000 \
\text { Rent } & 2,000 \
\text { Depreciation } & 4,000 \
\text { Other fixed costs } & 5,000 \
\text { Total } & \$ 25,000 \
\hline
\end{array}$$ Each chair was sold for $140 in July.Management estimates that sales will increase to 230 chairs during August if the company lowers the selling price to $130 per chair.Materials and labor are the only variable costs.How much is the incremental cost of producing an extra 30 chairs?
A)$1,900
B)$2,100
C)$3,750
D)$(200)

Question

Classic Loungers is in the process of preparing a production cost budget for August.Actual costs in July for 200 chaise lounge chairs were: $$\begin{array} { l r } 
\text { Materials cost } & 6,000 \
\text { Labor cost } & 8,000 \
\text { Rent } & 2,000 \
\text { Depreciation } & 4,000 \
\text { Other fixed costs } & 5,000 \
\text { Total } & \$ 25,000 \
\hline
\end{array}$$ Each chair was sold for $140 in July.Management estimates that sales will increase to 230 chairs during August if the company lowers the selling price to $130 per chair.Materials and labor are the only variable costs.How much is the incremental cost of producing an extra 30 chairs?
A)$1,900
B)$2,100
C)$3,750
D)$(200)

Quizplus · Accepted Answer

The incremental cost of producing an extra 30 chairs involves only the variable costs, which are materials and labor. The total variable costs for 200 chairs in July were $6,000 (materials) + $8,000 (labor) = $14,000. The variable cost per chair is $14,000 / 200 = $70. Therefore, the incremental cost for 30 additional chairs is $70 * 30 = $2,100.

Classic Loungers Is in the Process of Preparing a Production