show details plz: Computing and interpreting manufacturing unit cost. Minnesota
ID: 2378096 • Letter: S
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Computing and interpreting manufacturing unit cost. Minnesota office products (MOP) three differential 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 overhead costs of the plant in july 2011 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 2011 are as follows: Compute the manufacturing cost per unit for each product produced in July 2011 Suppose that in August 2011, production was 150 million units of Supreme 190 million unit, of deluxe and 220 million units of Regular. Why might the July 2011 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in august 2011?Explanation / Answer
Manufacturing Costs per unit = (Direct Materials Cost + Direct Labor Costs + MOH Costs)/ Units Produced
I.E. ($89+$16+$48)/125=$1.224 which rounds to $1.22
Other than the Fixed costs portion of the Manufacturing overhead, all other costs are variable costs. Thus when the production volume changes, the variable costs will change in accordance to the change in production volume.
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