Problem
Martinez Company's relevant range of production is 8,700 units to 13,700 units. When it produces and sells 11,200 units, its unit costs are as follows:
|
Amount
Per Unit
|
|
Direct materials
|
6.40
|
|
Direct labor
|
3.90
|
|
Variable manufacturing overhead
|
1.40
|
|
Fixed manufacturing overhead
|
4.40
|
|
Fixed selling expense
|
3.40
|
|
Fixed administrative expense
|
2.10
|
|
Sales commissions
|
1.10
|
|
Variable administrative expense
|
0.55
|
1. If the selling price is $22.40 per unit, what is the contribution margin per unit sold?
2a. If 12,200 units are produced, what are the total amount of direct manufacturing costs incurred to support this level of production?
2b. If 12,200 units are produced, what are the total amount of indirect manufacturing costs incurred to support this level of production?
3. What total incremental cost will Martinez incur if it increases production from 11,200 to 11,201 units?