Question

iz Help Save 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 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Pixed selling expense Fixed administrative expense $5.30 $2.80 $1.40 $4.00 $2.30 $2.20 $1.20 $0.45 manufacturing cost will Martinez incur if t increases production from 10,000 to 10,001 units? (Round your answer to 2 decimal places.) < Prev 15 or 15

Answer 1

Martinez Company

15. Determination of incremental manufacturing cost will Martinez incur if it increases production from 10,000 to 10,001 units:

Incremental manufacturing cost for 1 unit of production increase, from 10,000 – 10,001 units is the variable (direct) manufacturing cost per unit. The incremental manufacturing cost for production increase to 1 unit is computed as follows,

Direct materials                       $5.30

Direct labor                             $2.80

Variable MOH                        $1.40

Total variable manufacturing cost per unit = $9.50

Total incremental cost per unit increase in production = $9.50

Hence, incremental cost per unit produced = $9.50

Since, the increase in production is within the range of 7,500 to 12,500 units, the fixed cost in whole remains the same. Hence, the fixed manufacturing overhead cost is not relevant for computing the incremental cost per unit produced.

Also, the selling and administrative costs, including the variable and fixed components are not relevant as these costs are not directly related to production.