Question

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 $6.00, Direct Labor $3.50, Variable manufacturing overhead $1.50, Fixed Manufacturing overhead $4.00, Fixed selling expense $3.00, Fixed administrative expense $2.00, Sales Commissions $1.00, and Variable administrative expense $0.50.

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

Answer 1

The total amount of product cost incurred to make 10,000 units is $119,000.

Step-by-step explanation:

To calculate the total amount of product cost incurred to make 10,000 units, we need to sum up the relevant costs per unit. For direct materials, direct labor, and variable manufacturing overhead, we multiply the amounts per unit by the number of units (10,000). For fixed manufacturing overhead, fixed selling expense, fixed administrative expense, sales commissions, and variable administrative expense, we do not need to multiply by the number of units since these costs do not change based on production volume.

Calculations:

• Direct Materials: 10,000 units × $6.00 per unit = $60,000
• Direct Labor: 10,000 units × $3.50 per unit = $35,000
• Variable Manufacturing Overhead: 10,000 units × $1.50 per unit = $15,000
• Fixed Manufacturing Overhead: $4.00 per unit (does not change)
• Fixed Selling Expense: $3.00 per unit (does not change)
• Fixed Administrative Expense: $2.00 per unit (does not change)
• Sales Commissions: $1.00 per unit (does not change)
• Variable Administrative Expense: $0.50 per unit (does not change)

Total amount of product cost incurred to make 10,000 units = $60,000 + $35,000 + $15,000 + ($4.00 + $3.00 + $2.00 + $1.00 + $0.50) = $119,000