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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.





Materials - handling costs


Lubricants and coolants


Misc indirect labor


Misc direct labor


Direct materials inv Jan 1, 2010


Direct materials inv Dec 31, 2010


Finished goods inv, Jan 1, 2010


Finished goods inv, Dec 31, 2010


WIP Jan 1, 2010


WIP Dec 31, 2010


Plant lease costs


Depreciation - PPE


Property taxes




Direct materials purchased




Marketing Promo


Marketing Salaries


Distribution costs


Customer service costs


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.
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