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: 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 $5.20 $2.70 $1.50 $4.00 $2.20 $2.00 $1.00 $0.50 5. If 8,000 units are produced and sold, what is the total amount of variable costs related to the units produced and sold? (Do not round intermediate calculations.) Total variable cost

Answer 1

Ans:

First you need to differentiate variable costs and fixed costs.

Variable costs per unit:

Direct material = $5.20

Direct labor = $2.70

Variable manufacturing overhead= $1.50

Sales commission = $1

Variable administrative expense = $0.50

Total variable cost to produce and sell is sum of all variable costs.

Variable cost per unit = (5.20+2.70+1.50+1+0.5)

Variable cost per unit = 10.9

Total variable costs to produce and sell 8000 units is (8,000*$10.90)

Total variable cost = $87,200

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