Gormam, n the omam, Inc., a manufacturer of plastic products, reports the following manufactuning costs and account analysis classification or the year ended December 31, 2017 produced 70,000 units product in 2017. Gornam's management is estimating costs for 2018 on 2017 numbers. The following additional information is available for 2018. - X - X Data Table More Info a. Direct materials prices in 2018 are expected to increase by 8% compared with 2017. b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 4% in 2018 compared with 2017. c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2017 to 2018. d. Depreciation costs are expected to increase by 9%, and rent, property taxes, and administration costs are expected to increase by 8%. e. Gorham expects to manufacture and sell 80,000 units in 2018. Account Classification Amount Direct materials All variable s 367,500 Direct manufacturing labor All variable 297,500 Power All variable 87,500 Supervision labor 20% variable 70,000 Materials-handling labor 60% variable 35,000 Maintenance labor 40% variable 70,000 Depreciation 0% variable 94,000 Rent, property taxes, and administration 0% variable 110,000 Requirements Round ti 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018. Estimate total manufacturing costs for 2018. Print Done 2. Calculate Gorham's total manufacturing cost per unit in 2017, and estimate total manufacturing cost per unit in 2018.
Gormam, n the omam, Inc., a manufacturer of plastic products, reports the following manufactuning costs and account analysis classification or the year ended December 31, 2017 produced 70,000 units product in 2017. Gornam's management is estimating costs for 2018 on 2017 numbers. The following additional information is available for 2018. - X - X Data Table More Info a. Direct materials prices in 2018 are expected to increase by 8% compared with 2017. b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 4% in 2018 compared with 2017. c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2017 to 2018. d. Depreciation costs are expected to increase by 9%, and rent, property taxes, and administration costs are expected to increase by 8%. e. Gorham expects to manufacture and sell 80,000 units in 2018. Account Classification Amount Direct materials All variable s 367,500 Direct manufacturing labor All variable 297,500 Power All variable 87,500 Supervision labor 20% variable 70,000 Materials-handling labor 60% variable 35,000 Maintenance labor 40% variable 70,000 Depreciation 0% variable 94,000 Rent, property taxes, and administration 0% variable 110,000 Requirements Round ti 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018. Estimate total manufacturing costs for 2018. Print Done 2. Calculate Gorham's total manufacturing cost per unit in 2017, and estimate total manufacturing cost per unit in 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Gorham, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification
for the year ended December 31, 2017.
Gorham, Inc., produced 70,000 units of product in 2017. Gorham's management is estimating costs for 2018 on the basis of
2017 numbers. The following additional information is available for 2018.
- X
Data Table
More Info
Account
Classification
Amount
a. Direct materials prices in 2018 are expected to increase by 8% compared with 2017.
b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase
by 4% in 2018 compared with 2017.
Direct materials
All variable $
367,500
c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to
change from 2017 to 2018.
Direct manufacturing labor
All variable
297,500
Power
All variable
87,500
d. Depreciation costs are expected to increase by 9%, and rent, property taxes, and administration costs
are expected to increase by 8%.
e. Gorham expects to manufacture and sell 80,000 units in 2018.
Supervision labor
20% variable
70,000
Materials-handling labor
60% variable
35,000
Maintenance labor
40% variable
70,000
Depreciation
0% variable
94,000
Rent, property taxes, and administration
0% variable
110,000
Requirements
Round th
1. Prepare a schedule of variable, fixed, and total manufacturing costs for each
account category in 2018. Estimate total manufacturing costs for 2018.
Print
Done
2. Calculate Gorham's total manufacturing cost per unit in 2017, and estimate
total manufacturing cost per unit in 2018.
Power
100,000
3. How can you obtain better estimates of fixed and variable costs? Why would
these better estimates be useful to Gorham?
16.000
66 000
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