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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:   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 $ 0.5010. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

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 6.00Directlabor 6.00Direct labor 3.50Variable manufacturing overhead 1.50Fixedmanufacturingoverhead 1.50Fixed manufacturing overhead 4.00Fixed selling expense 3.00Fixedadministrativeexpense 3.00Fixed administrative expense 2.00Sales commissions 1.00Variableadministrativeexpense 1.00Variable administrative expense 0.5010. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

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Solution 1

The total amount of fixed manufacturing cost incurred to support a production level of 12,500 units can be calculated as follows:

First, we need to understand that fixed costs do not change with the level of production. They remain the same whether the company produces one unit or thousands of units. In this case, the fixed manufacturing overhead is given as $4.00 per unit when 10,000 units are produced.

To find the total fixed manufacturing cost, we multiply the fixed cost per unit by the number of units produced. However, since the fixed cost per unit remains the same regardless of the number of units produced, the total fixed manufacturing cost will remain the same even if the number of units produced increases to 12,500.

So, the total fixed manufacturing cost is:

Fixed manufacturing overhead per unit x number of units produced = 4.00perunitx10,000units=4.00 per unit x 10,000 units = 40,000

Therefore, the total amount of fixed manufacturing cost incurred to support a production level of 12,500 units is $40,000.

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Solution 2

The total amount of fixed manufacturing cost incurred to support a production level of 12,500 units can be calculated by multiplying the fixed manufacturing overhead cost per unit by the number of units produced.

Given that the fixed manufacturing overhead cost per unit is $4.00, the calculation would be as follows:

Fixed manufacturing overhead cost per unit ($4.00) * Number of units produced (12,500) = Total fixed manufacturing cost

So, 4.0012,500=4.00 * 12,500 = 50,000

Therefore, the total amount of fixed manufacturing cost incurred to support a production level of 12,500 units is $50,000.

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Solution 3

The total amount of fixed manufacturing cost incurred to support a production level of 12,500 units can be calculated as follows:

First, we need to understand that fixed costs do not change with the level of production. They remain the same whether the company produces one unit or thousands of units. In this case, the fixed manufacturing overhead is given as $4.00 per unit when 10,000 units are produced.

To find the total fixed manufacturing cost, we multiply the fixed manufacturing overhead per unit by the number of units produced:

Fixed manufacturing overhead per unit = $4.00 Number of units produced = 12,500 units

Total fixed manufacturing cost = Fixed manufacturing overhead per unit x Number of units produced Total fixed manufacturing cost = 4.00x12,500Totalfixedmanufacturingcost=4.00 x 12,500 Total fixed manufacturing cost = 50,000

So, the total amount of fixed manufacturing cost incurred to support a production level of 12,500 units is $50,000.

This problem has been solved

Similar Questions

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