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Home/ Questions/If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced?
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lizawr
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lizawr
Asked: April 11, 20222022-04-11T19:02:24+00:00 2022-04-11T19:02:24+00:00In: Accounting

If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced?

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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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8) If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced?...

1) If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced?

2) If 8,000 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

3) If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

4) 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?

5) If 12,500 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?

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

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

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


♦ Relevant knowledge
Costs of manufacturing that are fixed refer to costs that are fixed no matter if the item is made or if a thousand are produced.

Manufacturing overhead costs are the majority of indirect expenses that are incurred while making or producing products. In the field of financial management the indirect costs, sometimes referred to by the names of production burden, or factory overhead, are added on top of direct labor costs and material costs to create the price of the final product.

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    Jacob Garcia
    2022-04-11T19:02:26+00:00Added an answer on April 11, 2022 at 7:02 pm

    1)

    Fixed manufacturing cost per unit at 12,500 units = (Fixed manufacturing overhead per unit * 10,000) / 12,500

    = ($4.00 * 10,000) / 12,500

    = $40,000 / 12,500

    = $3.20

    2)

    Total manufacturing cost = 10,000 x $4.00

    = $40,000

    Fixed manufacturing costs are fixed at every level of output.

    3)

    Total manufacturing cost for 12,500 units = Fixed manufacturing costs per unit for 12,500 units * Units

    = $3.20 * 12,500

    = $40,000

    4)

    Variable manufacturing overhead = 8,000 units = $1.50

    = $12,000

    Fixed manufacturing overhead = $40,000

    Total manufacturing overhead = $12,000 + $40,000

    = $52,000

    Total manufacturing overhead per unit = $52,000 / 8,000

    = $6.50

    5)

    Variable manufacturing overhead = 12,500 units * $1.50

    = $18,750

    Fixed manufacturing overhead = $40,000

    Total manufacturing overhead = $18,750 + $40,000

    = $58,750

    Total manufacturing overhead per unit = $58,750 / 12,500

    = $4.70

    6)

    Contribution margin per unit = Selling price – Variable cost per unit

    Variable cost per unit = Direct material + Direct labor + Variable manufacturing overhead + Sales commission + Variable administrative expenses

    = $6.00 + $3.50 + $1.50 + $1.00 + $0.50

    = $12.50

    Contribution margin per unit = $22 – $12.50

    = $9.50

    7)

    Direct manufacturing costs = Direct materials + Direct labor * Units

    = ($6.00 + $3.50) * 11,000

    = $104,500

    Indirect manufacturing costs = (Variable manufacturing overhaed * 11,000) + Fixed manufacturing overhead

    = ($1.50 * 11,000) + ($4.00 * 10,000)

    = $16,500 + $40,000

    = $56,500

    8)

    Incremental manufacturing cost = (10,001-10,000) * (Direct materials + direct labor + variable manufacturing costs).

    = 1 * ($6.00 + $3.50 + $1.50)

    = $11

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