Question

1-15

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 Unit
Direct materials	$	5.20
Direct labor	$	2.70
Variable manufacturing overhead	$	1.50
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	2.20
Fixed administrative expense	$	2.00
Sales commissions	$	1.00
Variable administrative expense	$	0.50

What incremental manufacturing cost will Martinez incur if it increases production from 10,000 to 10,001 units? (Round your answer to 2 decimal places.)

Answer 1

Incremental manufacturing cost

= Direct Materials + Direct Labor + Variable Manufacturing Overhead

= 5.20 + 2.70 + 1.50

= 9.40

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