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 | $ | 6.10 | |
| Direct labor | $ | 3.60 | |
| Variable manufacturing overhead | $ | 1.40 | |
| Fixed manufacturing overhead | $ | 4.00 | |
| Fixed selling expense | $ | 3.10 | |
| Fixed administrative expense | $ | 2.10 | |
| Sales commissions | $ | 1.10 | |
| Variable administrative expense | $ | 0.55 | |
11. If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per unit basis?
| Total amount of manufacturing overhead cost | $51,200 |
| Manufacturing overhead cost per unit | $6.40 |
Explanation:
Total variable manufacturing overhead = 8,000 unit * $1.40 = $11,200
Total fixed manufacturing overhead = 10,000 unit * $4.00 = $40,000
Total amount of manufacturing overhead cost = Total variable manufacturing overhead + Total fixed manufacturing overhead
= $11,200 + $40,000 = $51,200.
Manufacturing overhead cost per unit = Total amount of manufacturing overhead cost / Number of units
= $51,200 / 8,000 units = $6.40.
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