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 average costs per unit are as follows:

	Average Cost Per Unit
Direct materials	$	5.20
Direct labor	$	2.70
Variable manufacturing overhead	$	1.50
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	2.20
Fixed administrative expense	$	2.00
Sales commissions	$	1.00
Variable administrative expense	$	0.50
1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units? (Do not round intermediate calculations.)

Answer 1

Total amount of product costs incurred to make 10,000 units						$ 1,34,000
Working:
	Particulars			Per Unit	Total
	Direct Materials			$       5.20	$     52,000
	Direct Labor			$       2.70	$     27,000
	Variable Manufacuring overhead			$       1.50	$     15,000
	Fixed Manufacturing overhead			$       4.00	$     40,000
	Total				$ 1,34,000
Product costs are those costs which are incurred to manufacture a product.
Selling, administration and commission expenses are not incurred to manufacture a product.