Question

Required information The Foundational 15 (LO1-1, LO1-2, LO1-3, LO1-4, LO1-5, LO1-6] [The following information applies to the questions displayed below.] Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost Per Unit $6.30 $3.80 $1.50 $4.00 $3.30 $2.00 $1.00 $0.50

Answer 1

Indirect manufacturing cost includes expenses incurred on the production of goods other than direct material and direct labor. Hence, variable manufacturing overhead and fixed manufacturing overhead are the indirect manufacturing costs.

Variable manufacturing overhead per unit = $1.50

Production = 11,000 units

Total variable manufacturing overhead = Production x Variable manufacturing overhead per unit

= 11,000 x 1.50

= $16,500

Fixed manufacturing overhead per unit at output level of 10,000 units = $4

Total fixed ,manufacturing overhead = Fixed manufacturing overhead per unit x Production

= 4 x 10,000

= $40,000

Total fixed manufacturing overhead will not change due to change in the output level.

Total indirect manufacturing cost = Total variable manufacturing overhead + Total fixed ,manufacturing overhead

= 16,500 + 40,000

= $56,500

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