two students are planning a weeklong trip from ohio to florida for spring break. if they drive, they will spend one night on the road on both the trip down and the trip back and will spend five nights at the beach. a hotel will cost $100 per night, and gas will cost $400. they will share those costs. food will cost each student $50 per day. the student who owns the car pays $600 per quarter for car insurance. the other option is flying, which will cost $450 per student but will give them two extra days at the beach. what is the incremental cost per student for transportation?

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15-11-2022
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two students are planning a weeklong trip from ohio to florida for spring break. if they drive, they will spend one night on the road on both the trip down and the trip back and will spend five nights at the beach. a hotel will cost $100 per night, and gas will cost $400. they will share those costs. food will cost each student $50 per day. the student who owns the car pays $600 per quarter for car insurance. the other option is flying, which will cost $450 per student but will give them two extra days at the beach. what is the incremental cost per student for transportation?

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sapanpandit sapanpandit · Answer 1 · 2022-11-18T08:52:27+01:00

If the alternative is to fly, it will cost $450 per student, but they will have two extra days at the beach, so the incremental cost for transportation is $250.

Gas cost per student = $400 ÷ 2 = $200

Flights per student $450

Incremental cost of flying per student = flights per student - gas cost per student = $250

Incremental cost is the extra expense a business faces if it produces one more unit of output. Relevant expenses that only change as a result of the decision to produce more units make up the additional cost.

Because it influences how much to charge for a product, incremental cost is significant. A company may decide to raise product price if transportation incremental costs result in an increase in product cost per unit in order to maintain its return on investment (ROI) and boost profit. On the other hand, if incremental cost results in a decrease in product cost per unit, a business may decide to lower the price of the product and boost profit by selling more units.

As a result, an increase in production is a result of incremental cost. Variable costs, which change in accordance with the level of production, transportation make up the majority of it. Direct labor costs for factory workers, raw incremental cost material inputs, and other movable overheads like power/energy and water usage costs are all included in incremental costs.

Learn more about incremental cost here

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