Martinez Company’s relevant range of production is 7,900 units to 12,900 units.

Question

Martinez Company’s relevant range of production is 7,900 units to 12,900 units. When it produces and sells 10,400 units, its unit costs are as follows: Amount Per Unit

Direct materials $ 6.60

Direct labor $ 4.10

Variable manufacturing overhead $ 1.50

Fixed manufacturing overhead $ 4.60

Fixed selling expense $ 3.60

Fixed administrative expense $ 2.00

Sales commissions $ 1.00

Variable administrative expense $ 0.50

  
1. If 8,400 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)
2. If 12,900 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)
3. If 8,400 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?
4. If 12,900 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?
5. If 8,400 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production?
6. If 8,400 units are produced, what is the total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.)
7. If 12,900 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production?
8. If 12,900 units are produced, what is the total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.)
9. If 11,400 units are produced, what are the total amount of direct manufacturing costs incurred to support this level of production?
10.If 11,400 units are produced, what are the total amount of indirect manufacturing costs incurred to support this level of production?

Explanation / Answer

1) Variable cost per unit - 8400 units sold Direct Material 6.60 Direct Labor 4.10 Variable Manufacturing overhead 1.50 Sales Commission 1.00 Variable administrative expense 0.50 Total variable cost per unit 13.70 2) Variable cost per unit -12900 units sold The variable cost per unit will be the same as above ie 13.70 per unit , as variable cost per unit does not change with the level of activity but the total variable cost will change with the level of activity 3) Fixed manufacturing overhead perunit at 10400 units produced = 10400 * 4.60 = 47840 This value will not change in the range of 7900 units to 12900 units Hence, the value of fixed manufacturing cost at 8400 level will be 47840 4) The fixed manufacturing cost will be the same as at 8400 level ie 47840 because there is no change in the specified range 5) Total Manufacturing overhead - 8400 units Variable manufacturing overhead = 1.50 * 8400 = 12600 Fixed Manufacturing overhead = 47840 Total Manufacturing overhead =60440 6) Total Manufacturing overhead cost per unit - 8400 units Total manufacturing overhead ( refer 5) 60440 Number of units 8400 per unit cost = 60440/8400 = 7.20 7) Total Manufacturing overhead - 12900 units Variable manufacturing overhead = 1.50 * 12900 = 19350 Fixed Manufacturing overhead = 47840 Total Manufacturing overhead =67190 8) Total Manufacturing overhead cost per unit - 12900 units Total manufacturing overhead ( refer 7) 67190 Number of units 12900 per unit cost = 67190/12900 = 5.21 9) Direct manufacturing cost - 11400 units Direct Material 6.60 Direct Labor 4.10 Variable Manufacturing overhead 1.50 Sales Commission 1.00 Variable administrative expense 0.50 Total variable cost per unit 13.70 Total direct manufacturing cost = 11400 * 13.70 = 156180 10) Indirect manufacturing cost - 11400 level The fixed manufacturing cost will be the same as at 11400 level ie 47840 because there is no change in the indirect manufacturing cost in the specifed range

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