Chapter 2, Problem 2.40P

Interpretation of statements (continuation of 2-39)

1. 1. How would the answer to Problem 2-39 be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific.

Required

1. 2. Would the sales manager’s salary (included in marketing, distribution, and customer-service costs) be accounted for any differently if the Howell Corporation were a merchandising-sector company instead of a manufacturing-sector company?
2. 3. Using the flow of manufacturing costs outlined in Figure 2-9 (page 44), describe how the wages of an assembler in the plant would be accounted for in this manufacturing company.
3. 4. Plant supervisory salaries are usually regarded as manufacturing overhead costs. When might some of these costs be regarded as direct manufacturing costs? Give an example.
4. 5. Suppose that both the direct materials used and the plant and equipment depreciation are related to the manufacture of 1 million units of product. What is the unit cost for the direct materials assigned to those units? What is the unit cost for plant and equipment depreciation? Assume that yearly plant and equipment depreciation is computed on a straight-line basis.
5. 6. Assume that the implied cost-behavior patterns in requirement 5 persist. That is, direct material costs behave as a variable cost and plant and equipment depreciation behaves as a fixed cost. Repeat the computations in requirement 5, assuming that the costs are being predicted for the manufacture of 1.2 million units of product. How would the total costs be affected?
6. 7. As a management accountant, explain concisely to the president why the unit costs differed in requirements 5 and 6.