Question

Required information [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: Average Cost Per Unit $6.60 $4.10 $1.50 $4.00 $3.60 $2.00 $1.00 $0.50 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? (Do not round intermediate calculations.) Total product cost

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units?

3. If 8,000 units are produced and sold, what is the variable cost per unit produced and sold?

4. If 8,000 units are produced and sold, what is the total amount of variable costs related to the units produced and sold?

5. If the selling price is $22.60 per unit, what is the contribution margin per unit?

Answer 1

1.

Direct material	$6.60
Direct labor	4.10
Variable manufacturing overhead	1.50
Fixed manufacturing overhead	4.00
Total product cost per unit	$16.2

Total product cost = 10,000*$16.2 = $162,000

2.

Fixed selling expense	$3.60
Fixed administrative expense	2.00
Sales commission	1.00
Variable administrative expense	0.50
Total period cost per unit	$7.1

Total period cost = 10,000*$7.1 = $71,000

3.

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	$13.7

4.

Total variable cost = 8,000*$13.7 = $109,600

5.

Contribution margin per unit = Selling price per unit - Variable cost per unit

Contribution margin per unit = $22.60 - 13.7 = $8.9 per unit