Question

Martinez Company’s relevant range of production is 8,900 units to 13,900 units. When it produces and sells 11,400 units, its unit costs are as follows:

	Amount Per Unit
Direct materials	$	6.70
Direct labor	$	4.20
Variable manufacturing overhead	$	1.40
Fixed manufacturing overhead	$	4.70
Fixed selling expense	$	3.70
Fixed administrative expense	$	2.10
Sales commissions	$	1.10
Variable administrative expense	$	0.55

14-a.

If 12,400 units are produced, what are the total amount of direct manufacturing costs incurred to support this level of production

14-b.

If 12,400 units are produced, what are the total amount of indirect manufacturing costs incurred to support this level of production?

15.	What total incremental cost will Martinez incur if it increases production from 11,400 to 11,401 units? (Round your answer to 2 decimal places.)

      

              

Answer 1

		On production of 11400units	On production of 12400units
	Particulars	Amount per unit in $	Amount per unit in $
	Direct Materials	6.7	6.7/11400*12400= $ 7.29
	Direct Labour	4.2	4.2/11400*12400= $4.57
	Variable Manufacturing Overhead	1.4	1.4/11400*12400= $1.52
	Fixed Manufacturing Overhead	4.7
	Fixed Selling expense	3.7
	Fixed administrative expense	2.1
	Sales commissions	1.1
	Variable Administrative expense	0.55
14. a)	If 12,400 units are produced, the total amount of direct manufacturing costs incurred to support this level of production will be
	(Direct Material + Direct Labour) * No. of units
	($7.29 +$4.57 ) *12400	$147064
14. b)	If 12,400 units are produced, the total amount of indirect manufacturing costs incurred to support this level of production will be
	Fixed Manufacturing Overhead + (Variable Manufacturing Overhead* No. of units)
	$4.7*11400 +$1.52*12400	$72428
15	Total incremental cost which Martinez will incur if it increases production from 11,400 to 11,401 units will be
	Only manufacturing cost that are variable will be incurred additional cost as rest are either fixed or sales & administrative costs.
	(Direct Material+ Direct Labour+ Variable Manufacturing Overhead)
	$6.7+$4.2+$ 1.4	$12.3 will be the incremental cost