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 UnitDirect materials $ 6.00Direct labor $ 3.50Variable manufacturing overhead $ 1.50Fixed manufacturing overhead $ 4.00Fixed selling expense $ 3.00Fixed administrative expense $ 2.00Sales commissions $ 1.00Variable administrative expense $ 0.507. If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?
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 UnitDirect materials 3.50Variable manufacturing overhead 4.00Fixed selling expense 2.00Sales commissions 0.507. If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?
Solution
The average fixed manufacturing cost per unit produced does not change with the level of production. This is because fixed costs, by definition, do not change with the level of output. They are 'fixed' for a certain range of production, in this case, 7,500 units to 12,500 units.
So, if Martinez Company produces 8,000 units or 10,000 units, the average fixed manufacturing cost per unit will remain the same, which is $4.00 per unit.
Similar Questions
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 UnitDirect materials $ 6.00Direct labor $ 3.50Variable manufacturing overhead $ 1.50Fixed manufacturing overhead $ 4.00Fixed selling expense $ 3.00Fixed administrative expense $ 2.00Sales commissions $ 1.00Variable administrative expense $ 0.5013. If the selling price is $22 per unit, what is the contribution margin per unit? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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