Question

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
Direct materials	$	7.00
Direct labor	$	4.50
Variable manufacturing overhead	$	1.40
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	4.00
Fixed administrative expense	$	2.10
Sales commissions	$	1.10
Variable administrative expense	$	0.55

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? (

Answer 1

1. Total amount of products costs

Direct materials ($7.00 * 10,000)	$70,000
Direct labor ($4.50 * 10,000)	$45,000
Variable manufacturing overhead ($1.40 * 10,000)	$14,000
Fixed manufacturing overhead ($4.00 * 10,000)	$40,000
Product cost	$169,000