fun125 posted a question Jan 20, 2013 at 6:21pm
Steel Company USA is a metal fabricating business that sells products mainly to the home construction market. The data table that follows should be used in this assignment. The problems are at the end of the data table.

Inputs

Costs

Sandpaper

\$4,000

Materials - handling costs

\$140,000

Lubricants and coolants

\$10,000

Misc indirect labor

\$80,000

Misc direct labor

\$600,000

Direct materials inv Jan 1, 2010

\$80,000

Direct materials inv Dec 31, 2010

\$100,000

Finished goods inv, Jan 1, 2010

\$200,000

Finished goods inv, Dec 31, 2010

\$300,000

WIP Jan 1, 2010

\$20,000

WIP Dec 31, 2010

\$28,000

Plant lease costs

\$108,000

Depreciation - PPE

\$72,000

Property taxes

\$8,000

Insurance

\$6,000

Direct materials purchased

\$920,000

Revenues

\$2,720,000

Marketing Promo

\$120,000

Marketing Salaries

\$200,000

Distribution costs

\$140,000

Customer service costs

\$200,000

Using the information in the table, create an income statement with a schedule for costs of goods manufactured. Make sure that for the costs you classify if they are direct or indirect and indicate if they are variable or fixed.
Let's assume that both direct material costs and plant leasing costs are for the production of 1,800,000 units. What would be the direct material cost of each of these units produced? Plant leasing cost per unit? Plant leasing should be a fixed cost here.
Now let's assume we build 2,000,000 units next year. Repeat the calculations in item #2 above for direct materials and plant leasing costs.
Explain why the unit costs for direct materials didn't change in numbers 2 and 3, but the unit costs for the plant lease did.