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:

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01-09-2017
Business

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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 average costs per unit are as follows:

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Part 1.)

For financial accounting purposes, the total amount of product cost incurred to make 10,000 units is given by

($6.00 x 10,000) + ($3.50 x 10,000) + ($1.50 x 10,000) + ($4.00 x 10,000) = $60,000 + $35,000 + $15,000 + $40,000 = $150,000

Part 2.

The total amount of period cost to make 10,000 units is given by
($3.00 x 10,000) + ($2.00 x 10,000) + ($1.00 x 10,000) + ($0.50 x 10,000) = $30,000 + $20,000 + $10,000 + $5,000 = $65,000.

Part 3.)

If 8,000 units are sold the variable cost per unit sold is given by
[($6.00 x 8,000) + ($3.50 x 8,000) + ($1.50 x 8,000) + ($1.00 x 8,000) + ($0.50 x 8,000)] / 8,000 = ($48,000 + $28,000 + $12,000 + $8,000 + $4,000) / 8,000 = $100,000 / 8,000 = $12.50

Part 4.)

Therefore, if 12,500 units are sold the variable cost per unit sold is given by
[($6.00 x 12,500) + ($3.50 x 12,500) + ($1.50 x 12,500) + ($1.00 x 12,500) + ($0.50 x 12,500)] / 12,500 = ($75,000 + $43,750 + $18,750 + $12,500 + $6,250) / 12,500 = $156,250 / 12,500 = $12.50

Part 5.)

Therefore, if 8,000 units are sold the variable cost related to the units sold is given by
($6.00 x 8,000) + ($3.50 x 8,000) + ($1.50 x 8,000) + ($1.00 x 8,000) + ($0.50 x 8,000) = $48,000 + $28,000 + $12,000 + $8,000 + $4,000 = $24,000 = $100,000

Part 6.)

If 12,500 units are sold the variable cost per unit sold is given by
($6.00 x 12,500) + ($3.50 x 12,500) + ($1.50 x 12,500) + ($1.00 x 12,500) + ($0.50 x 12,500) = $75,000 + $43,750 + $18,750 + $12,500 + $6,250 = $156,250

Part 7.)

Given that 10,000 units were budgeted, thus the total fixed manufacturing overhead is given by 10,000 x $4.00 = $40,000

Therefore, if 8,000 units are produced, the average fixed manufacturing cost per unit produced is given by $40,000 / 8,000 = $5.00

Part 8.)

If 12,500 units are produced, the average fixed manufacturing cost per unit produced is given by $40,000 / 12,500 = $3.20

Part 9.)

If 8,000 units are produced, the fixed manufacturing cost incured to support this level of production is $40,000

Part 10.)

If 12,500 units are produced, the fixed manufacturing cost incured to support this level of production is $40,000

Part 11.)

The total variable manufacturing overhead is given by $1.50 x 8,000 = $12,000

Given that 10,000 units were budgeted, thus the total fixed manufacturing overhead is given by 10,000 x $4.00 = $40,000

Therefore, the total amount of manufacturing overhead cost incurred to support this level of production is given by $12,000 + $40,000 = $52,000

And the the total amount of manufacturing overhead cost incurred to support this level of production expressed on a per unit basis is given by $52,000 / 8,000 = $6.50

Part 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 the total amount expressed on a per unit basis?

The total variable manufacturing overhead is given by $1.50 x 12,500 = $18,750

Therefore, the total amount of manufacturing overhead cost incurred to support this level of production is given by $18,750 + $40,000 = $58,750

And the the total amount of manufacturing overhead cost incurred to support this level of production expressed on a per unit basis is given by $58,750 / 12,500 = $4.70

Part 13.)

If selling price is $22 per unit, what is the contribution margin per unit sold?

Contribution margin is a product’s price minus all associated variable costs, resulting in the incremental profit earned for each unit sold.

The variable cost per unit sold is given by $6.00 + $3.50 + $1.50 + $1.00 + $0.50 = $12.50
Therefore, the contribution margin per unit sold is given by $22 - $12.50 = $9.50

Part 14.)

If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

Thus the total amount of direct manufacturing costs is given by ($6.00 x 11,000) + ($3.50 x 11,000) = $66,000 + $38,500 = $104,500

Thus the total amount of indirect manufacturing costs incurred is given by ($1.50 x 11,000) + ($4.00 x 11,000) = $16,500 + $44,000 = $60,500

Therefore, the total amounts of direct and indirect manufacturing costs incurred to support this level of production is given by $104,500 + $60,500 = $165,000.

Part 15.)

What total incremental cost will Martinez incur if it increases production from 10,000 to 10, 001 units?

An incremental cost is the increase in total costs resulting from an increase in production.

The total cost for the production of 10,000 units is given by ($6.00 + $3.50 + $1.50 + $4.00 + $3.00 + $2.00 + $1.00 + $0.50) x 10,000 = $21.5 x 10,000 = $215,000

The total cost for the production of 10,001 units is given by ($6.00 + $3.50 + $1.50 + $4.00 + $3.00 + $2.00 + $1.00 + $0.50) x 10,001 = $21.5 x 10,001 = $215,021,50

Therefore, the total incremental cost Martinez will incur if it increases production from 10,000 to 10, 001 units is given by $215,021.50 - $215,000 = $21.50