# Foundational 15 Chapter 1 Essay

642 Words3 Pages
Chapter 1
The Foundational 15

Martinez Company’s relevant range of Production is 7,500 to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:

| AmountPer Unit | Direct Materials | \$ 6.00 | Direct Labor | 3.50 | Variable Manufacturing Overhead | 1.50 | Fixed Manufacturing Overhead | 4.00 | Fixed Selling Expenses | 3.00 | Fixed Administrative Expense | 2.00 | Sales Commissions | 1.00 | Variable Administration Expense | 0.50 |

Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

Direct Materials \$6.00
Direct Labor \$3.50
Variable Manuf OH \$1.50
Fixed Manuf OH \$4.00
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8000 x \$4.00 = \$32,000

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

12500 x \$4.00 = \$50,000

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 the total amount expressed on a per unit basis?

Variable Manuf. OH \$1.50
Fixed Manuf. OH \$4.00 \$5.50

8000 x \$5.50 = \$44,000

12. If 12,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is the total amount expressed on a per unit basis?

Variable Manuf. OH \$1.50
Fixed Manuf. OH \$4.00 \$5.50

12500 x \$5.50 = \$68,750

13. If the selling price is \$22 per unit, what is the contribution margin per unit sold?

Selling Price \$22.00 * Direct Materials \$6.00 * Direct Labor \$3.50 * Var. Manuf. OH \$1.50 * Sales Commission \$1.00 * Var Admin Exp \$0.50 \$12.50
Contribution Margin \$9.50

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

Direct Materials \$6.00
Direct Labor \$3.50
Variable Manuf. OH \$1.50
Fixed Manuf. OH \$4.00 \$15.00

15. What total incremental cost will