2-16 Computing and interpreting manufacturing unit costs. Minnesota Office Products (MOP) produces three different 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 costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July 2014 are $150 million (S15 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 2014 are as follows: Supreme Deluxe Regular $ 89 $ 16 $ 48 $ 60 $ 57 $ 8 $ 26 $ 24 $ 78 140 Direct material costs Direct manufacturing labor costs Manufacturing overhead costs Units produced 125 150 1. Compute the manufacturing cost per unit for each product produced in July 2014. 2. Suppose that, in August 2014, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2014 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2014?
2-16 Computing and interpreting manufacturing unit costs. Minnesota Office Products (MOP) produces three different 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 costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July 2014 are $150 million (S15 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 2014 are as follows: Supreme Deluxe Regular $ 89 $ 16 $ 48 $ 60 $ 57 $ 8 $ 26 $ 24 $ 78 140 Direct material costs Direct manufacturing labor costs Manufacturing overhead costs Units produced 125 150 1. Compute the manufacturing cost per unit for each product produced in July 2014. 2. Suppose that, in August 2014, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2014 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2014?
Chapter1: Financial Statements And Business Decisions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:2-16 Computing and interpreting manufacturing unit costs. Minnesota Office Products (MOP) produces
three different 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 costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total
manufacturing overhead costs of the plant in July 2014 are $150 million (S15 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 2014 are as follows:
Supreme
Deluxe
Regular
$ 60
$ 57
$ 26
$ 8
$ 78
$ 24
Direct
aterial costs
$89
Direct manufacturing labor costs
Manufacturing overhead costs
Units produced
$ 16
$ 48
125
150
140
1. Compute the manufacturing cost per unit for each product produced in July 2014.
2. Suppose that, in August 2014, production was 150 million units of Supreme, 190 million units of Deluxe,
and 220 million units of Regular. Why might the July 2014 information on manufacturing cost per unit be
misleading when predicting total manufacturing costs in August 2014?
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