Question

Required information The Foundational 15 (L01-1, L01-2, LO1-3, L01-4, 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 Pixed 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 $1.00 $0.50 Foundational 1-11 11.1f 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per unit basis? (Round your "per unit" answer to 2 decimal places and other answers to the nearest whole dollar amount.) Total manufacturing overhead cost Manufacturing overhead per unit

Answer 1

The manufacturing overhead are fixed manufacturing overhead and variable manufacturing overhead

where the total fixed manufacturing overhead remains same

it means the fixed manufacturing overhead at a level of 10000 units will be the at 8000 units

So Fixed manufacturing overhead = 10000*$4 = $40000

Variable manufacturing overhead changes with output so

Variable manufacturing overhead per unit = $1.50

Level of production = 8000

Total variable manufacturing overhead = 8000*$1.50 = $12000

Total manufacturing overhead = $12000+$40000 = $52000

Manufacturing overhead per unit = $52000/8000 = $6.5

Now at 12500 Units

As said earlier total fixed manufacturing overhead cost remains same

So Fixed manufacturing overhead = 10000*$4 = $40000

Variable manufacturing overhead per unit = $1.50

Level of production = 12500

Total variable manufacturing overhead = 12500*$1.50 = $18750

Total manufacturing overhead = $18750+$40000 = $58750

Manufacturing overhead per unit = $58750/12500 = $4.7

Now the last part of the question

The incremental cost to produce a unit is the variable cost per unit as the fixed cost remains same at all level of production

So the incremental manufacturing cost = Direct material per unit + direct labour per unit + variable manufacturing overhead

= $6.00+$3.50+$1.50 = $11.00

Hence solved

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Thank You