# Incremental cost please help

jmh
Registered Posts:

**41**
I wonder if someone can explain this to me. I am studding from Osborne book chapter 6 question 6.3 in tutorial.

They are asking what is the incremental cost for variable production cost.

Selling price is 15

variable production cost is 9

Fixed overheads based on production of 7000 units per week are 4

total production cost is 13

profit is 2

UK sales 7000 units per week no overseas sales. Capacity is 8000 units per week

overseas customer offered to buy 1500 units per week

The answer is 9000 and I dont know how they got to it.

Would be grateful if someone could explain to me. I am coming to 4500

Thank you

They are asking what is the incremental cost for variable production cost.

Selling price is 15

variable production cost is 9

Fixed overheads based on production of 7000 units per week are 4

total production cost is 13

profit is 2

UK sales 7000 units per week no overseas sales. Capacity is 8000 units per week

overseas customer offered to buy 1500 units per week

The answer is 9000 and I dont know how they got to it.

Would be grateful if someone could explain to me. I am coming to 4500

Thank you

## Answers

32Incremental cost would just be the variable element as the fixed overheads are the same regardless of output, so the incremental cost would be:

1,000 units x £9 (variable cost per unit) = £9,000

41