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Required informationThe Foundational 15 (Algo) [LO1-1, LO1-2, LO1-3, LO1-4, LO1-5, LO1-6]Skip to question[The following information applies to the questions displayed below.]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 $ 5.10Direct labor $ 2.60Variable manufacturing overhead $ 1.60Fixed manufacturing overhead $ 4.00Fixed selling expense $ 2.10Fixed administrative expense $ 2.10Sales commissions $ 1.10Variable administrative expense $ 0.55Foundational 1-12 (Algo)12. If 12,500 units are produced, what is the total manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per-unit basis?Note: Round your "per unit" answer to 2 decimal places.

Question

Required informationThe Foundational 15 (Algo) [LO1-1, LO1-2, LO1-3, LO1-4, LO1-5, LO1-6]Skip to question[The following information applies to the questions displayed below.]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 5.10Directlabor 5.10Direct labor 2.60Variable manufacturing overhead 1.60Fixedmanufacturingoverhead 1.60Fixed manufacturing overhead 4.00Fixed selling expense 2.10Fixedadministrativeexpense 2.10Fixed administrative expense 2.10Sales commissions 1.10Variableadministrativeexpense 1.10Variable administrative expense 0.55Foundational 1-12 (Algo)12. If 12,500 units are produced, what is the total manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per-unit basis?Note: Round your "per unit" answer to 2 decimal places.

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Solution

The total manufacturing overhead cost is the sum of the variable manufacturing overhead and the fixed manufacturing overhead.

First, we need to calculate the variable manufacturing overhead for 12,500 units.

Variable manufacturing overhead per unit is $1.60. So for 12,500 units, it would be:

Variable manufacturing overhead = 12,500 units * 1.60/unit=1.60/unit = 20,000

The fixed manufacturing overhead is a constant amount and does not change with the level of production. It is given as $4.00 per unit when 10,000 units are produced.

Fixed manufacturing overhead = 10,000 units * 4.00/unit=4.00/unit = 40,000

Now, we add the variable and fixed manufacturing overhead to get the total manufacturing overhead cost:

Total manufacturing overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead = 20,000+20,000 + 40,000 = $60,000

To express this total amount on a per-unit basis, we divide the total manufacturing overhead cost by the number of units produced:

Total manufacturing overhead cost per unit = Total manufacturing overhead cost / Number of units produced = 60,000/12,500units=60,000 / 12,500 units = 4.80 per unit (rounded to 2 decimal places).

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