2-21 Computing and interpreting manufacturing unit costs. Minnesota Office Produ
ID: 2332680 • Letter: 2
Question
2-21 Computing and interpreting manufacturing unit costs. Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July 2017 are $150 million ($15 million of which are fixed). This total amount is allocated to each product line on the basis of the direct manufacturing labor costs of each line. Summary data (in millions) for July 2017 are as follows:
Supreme Deluxe Regular
Direct material costs 89 57 60
Direct manufacturing labor costs 16 26 8
manufacturing overhead costs 48 78 24
units produced 125 150 140
Compute the manufacturing cost per unit for each product produced in July 2017.
2. Suppose that, in August 2017, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2017 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2017?
Explanation / Answer
1) Calculating cost per unit
2) Predicted mfg cost can be misleading because production of each product has been changed. hence no of labour hours were also changed.Hence distribution of variable cost will also change accordingly because it is based on Labour hous.
Previously calculated cost per unit is based on production on july which is different from august , hence we can not predict cost of per unit if Units are different.
Particulars Supreme deluxe regular Direct mat cost 89 57 60 Direct Labour 16 26 8 Mfg OH 48 78 24 Total Cost 153 161 92 Units produced 125 150 140 Mfg cost per unit 1.224 1.073 0.657Related Questions
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