S2 - 2-16 CHAPTER 2 AN INTRODUCTION (15 min.) Computing and...

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CHAPTER 2 AN INTRODUCTION 2-16 (15 min.) Computing and interpreting manufacturing unit costs . 1. (in millions) Supreme Deluxe Regular Total Direct material cost $ 89.00 $ 57.00 $60.00 $206.00 Direct manuf. labor costs 16.00 26.00 8.00 50.00 Manufacturing overhead costs 48.00 78.00 24.00 150.00 Total manuf. costs 153.00 161.00 92.00 406.00 Fixed costs allocated at a rate of $15M$50M (direct mfg. labor) equal to $0.30 per dir. manuf. labor dollar (0.30 $16; 26; 8) 4.80 7.80 2.40 15.00 Variable costs $148.20 $153.20 $89.60 $391.00 Units produced (millions) 125 150 140 Cost per unit (Total manuf. costs ÷ units produced) $1.2240 $1.0733 $0.6571 Variable manuf. cost per unit (Variable manuf. costs Units produced) $1.1856 $1.0213 $0.6400 (in millions) Supreme Deluxe Regular Total 2. Based on total manuf. cost per unit ($1.2240 150; $1.0733 190; $0.6571 220) $183.60 $203.93 $144.56 $532.09 Correct total manuf. costs based on variable manuf. costs plus fixed costs equal Variable costs ($1.1856 150; $177.84 $194.05 $140.80 $512.69 $1.0213 190; $0.64 220) Fixed costs 15.00 Total costs $527.69 The total manufacturing cost per unit in requirement 1 includes $15 million of indirect manufacturing costs that are fixed irrespective of changes in the volume of output per month, while the remaining variable indirect manufacturing costs change with the production volume. Given the unit volume changes for August 2011, the use of total manufacturing cost per unit from the past month at a different unit volume level (both in aggregate and at the individual product level) will overestimate total costs of $532.09 million in August 2011 relative to the correct total manufacturing costs of $527.69 million calculated using variable manufacturing cost per unit times units produced plus the fixed costs of $15 million. 2-17 (15 min.) Direct, indirect, fixed and variable costs. 1. Yeast – direct, variable Flour- direct, variable 2-1
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Packaging materials –direct (or could be indirect if small and not traced to each unit), variable Depreciation on ovens –indirect, fixed (unless “units of output” depreciation, which then would be variable) Depreciation on mixing machines–indirect, fixed (unless “units of output” depreciation, which then would be variable) Rent on factory building – indirect, fixed Fire Insurance on factory building–indirect, fixed Factory utilities – indirect, probably some variable and some fixed (e.g. electricity may be variable but heating costs may be fixed) Finishing department hourly laborers – direct, variable (or fixed if the laborers are under a union contract) Mixing department manager – indirect, fixed Materials handlers –depends on how they are paid. If paid hourly and not under union contract, then indirect, variable. If salaried or under union contract then indirect, fixed Custodian in factory –indirect, fixed Night guard in factory –indirect, fixed Machinist (running the mixing machine) –depends on how they are paid. If paid hourly and
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S2 - 2-16 CHAPTER 2 AN INTRODUCTION (15 min.) Computing and...

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