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 $6.00 $3.50 $1.50 $4.00 $3.00 $2.00 $1.ee $0.50 Foundational 1-1 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? Total product cost

Answer 1

1. Total product cost :

Direct Material (6*10,000) 60,000

Direct Labour (3.5*10,000) 35000

Variable manufacturing overhead (1.5*10,000) 15,000

Fixed manufacturing overhead (4*10,000). 40,000

Total product cost $ 150,000

2. Period cost

Fixed selling expense (3*10,000). 30,000

Fixed administration expense (2*10,000). 20,000

Sales commission (1*10,000). 10,000

Variable admin expense (0.5*10,000). 5,000

Total period cost $ 65,000

3. Variable cost per unit :

Direct material 6

Direct labour. 3.5

Variable manufacturing overhead. 1.5

Sales commission. 1

Variable admin expense. 0.5

Total variable cost per unit 12.5

If 8,000 units are produced and sold, variable cost per unit is $ 12.50 per unit

4. If 12,500 units are produced and sold, variable cost per unit is $ 12.50 per unit