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 2017 are $150 million ($15 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 2017 are as follows: Regular $ 60 Supreme $ 89 $ 16 $ 48 Deluxe $ 57 $ 26 $ 78 Direct material costs Direct manufacturing labor costs Manufacturing overhead costs Units produced $ 24 140 125 150 1. Compute the manufacturing cost per unit for each product produced in July 2017. 2. Suppose that, in August 2017, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2017 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2017?
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 2017 are $150 million ($15 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 2017 are as follows: Regular $ 60 Supreme $ 89 $ 16 $ 48 Deluxe $ 57 $ 26 $ 78 Direct material costs Direct manufacturing labor costs Manufacturing overhead costs Units produced $ 24 140 125 150 1. Compute the manufacturing cost per unit for each product produced in July 2017. 2. Suppose that, in August 2017, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2017 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2017?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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 2017 are $150 million ($15 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 2017 are as follows:
Regular
$ 60
Supreme
$ 89
$ 16
$ 48
Deluxe
$ 57
$ 26
$ 78
Direct material costs
Direct manufacturing labor costs
Manufacturing overhead costs
Units produced
$ 24
140
125
150
1.
Compute the manufacturing cost per unit for each product produced in July 2017.
2.
Suppose that, in August 2017, production was 150 million units of Supreme, 190 million units of Deluxe,
and 220 million units of Regular. Why might the July 2017 information on manufacturing cost per unit be
misleading when predicting total manufacturing costs in August 2017?
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