Hamway, Inc., produced 80,000 units of product in 2014. Hamwey\'s management is

Question

Hamway, Inc., produced 80,000 units of product in 2014. Hamwey's management is estimating costs for 2015 on the basis of 2014 numbers. The following additional information is available for 2015. 1.Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2015. Estimate total manufacturing costs for 2015. 2. Calculate Hamwey's total manufacturing cost per unit in 2014, and estimate total manufacturing cost per unit in 2015. 3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Hamwey?

Account Classification Amount

Direct materials All variable $320,000

Direct manufacturing labor All variable 240000

Power All variable 40000

Supervision labor 20% variable 68000

Materials-handling labor 40% variable 60000

Maintenance labor 45% variable 80000

Depreciation 0% variable 92000

Rent, property taxes, and administration 0% variable 95000

1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2015. Estimate total manufacturing costs for 2015.

2.Calculate Hamwey”s total manufacturing cost per unit in 2014, and estimate total manufacturing cost per unit in 2015

3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Hamwey?

4. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 12% in 2015 compared with 20142014.

Explanation / Answer

A Units manufactured 80000 B COST FOR 2014 Cost Account category Variable Fixed Total Direct material 320000 0 320000 Direct manufacturing labor 240000 0 240000 Power 40000 0 40000 Supervision labor 68000 272000 340000 20% Variable Matrial handling labor 60000 90000 150000 40% variable Maintenanc labor 80000 97778 177778 45% variable Depreciation 0 92000 92000 Rent, propert taxes, admn etc 0 95000 95000 808000 646778 1454778 Cost per unit 10.10 8.085 18.185 C COST FOR 2015 Cost Account category Variable Fixed Total Direct material 320000 0 320000 Direct manufacturing labor 268800 0 268800 Power 40000 0 40000 Supervision labor 68000 272000 340000 20% Variable Matrial handling labor 60000 90000 150000 40% variable Maintenanc labor 80000 97778 177778 45% variable Depreciation 0 92000 92000 Rent, propert taxes, admn etc 0 95000 95000 836800 646778 1483578 Cost per unit assuming 80000 units for 2015 10.46 8.085 18.545 D Some part of the adninistration cost should be variable

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