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 $ 6.20 Direct labor $ 3.70 Variable manufacturing overhead $ 1.60 Fixed manufacturing overhead $ 4.00 Fixed selling expense $ 3.20 Fixed administrative expense $ 2.20 Sales commissions $ 1.20 Variable administrative expense $ 0.45 3. If 8,000 units are produced and sold, what is the variable cost per unit produced and sold?

Answer 1

Computation of Variable cost per unit produced and sold

Direct Material = $6.20

Direct Labor = $3.70

Variable Manufacturing overhead = $1.60

Sales Commissions = $1.20

Variable administrative expenses = $0.45

Total Variable cost per unit produced and sold = $13.15

Total number of units produced and sold = 8,000 units

Total variable cost = 13.15*8000 units = $105,200