Question

Martinez Company’s relevant range of production is 9,500 units to 14,500 units. When it produces and sells 12,000 units, its unit costs are as follows:

Amount Per Unit

Direct materials $ 5.40

Direct labor $ 2.90

Variable manufacturing overhead $ 1.60

Fixed manufacturing overhead$ 3.40

Fixed selling expense $ 2.40

Fixed administrative expense $ 2.10

Sales commissions $ 1.10

Variable administrative expense $ 0.55

1.) If 10,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? 2.)If 10,000 units are produced, what is the total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.) 3.) If 14,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? 4.)If 14,500 units are produced, what is the total amount of manufacturing overhead cost expressed on a per unit basis? (Round your answer to 2 decimal places.)

Answer 1

Ans:-

1. Calculation of manufacturing Overhead Cost incurred to support 10000 units of level of production is as follows:-

Formula: Total Manufacturing Overhead Cost = Total Variable Overhead Cost + Total Fixed overhead Cost

Calculation of Variable overhead cost :-

Variable Overhead Cost = Variable Overhead Cost per unit + Number of units Produced

= $1.60 × 10000 units

Variable Overhead Cost = $16000 - (Step 1)

Calculation of Fixed Overhead Cost :-

Fixed Overhead Cost = Fixed manufacturing Overhead Per Unit × Number of Units Produced

= $3.40 × 10000 units

Total Fixed Overhead Cost = $34000 - (Step 2)

Total Manufacturing Overhead Cost = $16,000 + $34,000 = $50,000

2. Calculation of Manufacturing Overhead Per unit:

Formula: Manufacturing Overhead Cost Per unit = Total Manufacturing Overhead cost ÷ Number of units produced

= $50,000 ÷ 10000 units

= Manufacturing Overhead Cost per unit = $5

3.

Calculation of manufacturing Overhead Cost incurred to support 14500 units of level of production is as follows:-

Formula: Total Manufacturing Overhead Cost = Total Variable Overhead Cost + Total Fixed overhead Cost

Calculation of Variable overhead cost :-

Variable Overhead Cost = Variable Overhead Cost per unit + Number of units Produced

= $1.60 × 14500 units

Variable Overhead Cost = $23200 - (Step 1)

Calculation of Fixed Overhead Cost :-

Fixed Overhead Cost = Fixed manufacturing Overhead Per Unit × Number of Units Produced

= $3.40 × 14500 units

Total Fixed Overhead Cost = $49300 - (Step 2)

Total Manufacturing Overhead Cost = $23200 + $49300 = $72500

2. Calculation of Manufacturing Overhead Per unit:

Formula: Manufacturing Overhead Cost Per unit = Total Manufacturing Overhead cost ÷ Number of units produced

= $72500 ÷ 14500 units

= Manufacturing Overhead Cost per unit = $5