Question

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Martinez Company’s relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:

	Amount Per Unit
Direct materials	$	6.90
Direct labour	$	4.40
Variable manufacturing overhead	$	1.50
Fixed manufacturing overhead	$	4.90
Fixed selling expense	$	3.90
Fixed administrative expense	$	2.00
Sales commissions	$	1.00
Variable administrative expense	$	0.50

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units?

3. If 8,000 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)

4. If 12,500 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)

5. If 12,500 units are sold, what is the variable cost per unit sold? (Round your answer to 2 decimal places.)

6. If 12,500 units are sold, what is the total amount of variable costs related to the units sold?

Answer 1

1	Product Costs to make 10000 Units
		Per Unit	$
	Direct materials	6.9	69000
	Direct labour	4.4	44000
	Variable manufacturing overhead	1.5	15000
	Fixed manufacturing overhead	4.9	49000
	Total		177000
2	Period Costs to make 10000 Units
	Fixed selling expense	3.9	39000
	Fixed administrative expense	2	20000
	Sales commissions	1	10000
	Variable administrative expense	0.5	5000
	Total		74000
3	Variable cost per Unit for 8000 Units
	Direct materials	6.9
	Direct labour	4.4
	Variable manufacturing overhead	1.5
	Sales commissions	1
	Variable administrative expense	0.5
	Total	14.3
4	Variable cost per Unit for 12500 Units	14.3
5	Variable cost per Unit for 12500 Units	14.3
6	Total Variable Costs for 12500 Units	178750
	(14.3*12500)