Required information [The following information applies to the questions display
ID: 2329231 • Letter: R
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 $5.80 $3.30 $1.50 $4.00 $2.80 $2.00 $1.00 $0.50 12. If 12,500 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 unitExplanation / Answer
Manufacturing Overheads includes all cost related to manufacture of a product except direct labor and Direct materials. Examples of Manufacturing Overheads are Rent of Factory, Depreciation of Production equipment, indirect labor, Indirect Material etc. Selling and Administrative expenses are not a part of Manufacturing Overheads.
Schedule of Manufacturing cost at Different levels of Output
Units
Units
10000
12500
Per Unit
Total
Per Unit
Total
Variable Manufacturing Overheads
$ 1.50
$ 15,000.00
$ 1.50
$ 18,750.00
Fixed Manufacturing Overheads
$ 4.00
$ 40,000.00*
$ 3.20
$ 40,000.00
Total Manufacturing overheads
$ 5.50
$ 55,000.00
$ 4.70
$ 58,750.00
*4 x10000 units
Variable cost per Unit remains same but it will increase in total when there is any increase in number of units produced and Vice versa.
On the other hand Fixed cost per unit changes according to activity level. Since Fixed cost in totality remains same, when number of units produced increase fixed cost per unit decrease and when number of Units produced decrease fixed cost per unit Increase.
Final Answers
Total Manufacturing Overhead cost -----$58,750
Manufacturing Overhead per Unit---------$4.70
Schedule of Manufacturing cost at Different levels of Output
Units
Units
10000
12500
Per Unit
Total
Per Unit
Total
Variable Manufacturing Overheads
$ 1.50
$ 15,000.00
$ 1.50
$ 18,750.00
Fixed Manufacturing Overheads
$ 4.00
$ 40,000.00*
$ 3.20
$ 40,000.00
Total Manufacturing overheads
$ 5.50
$ 55,000.00
$ 4.70
$ 58,750.00
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