Question

Massachusetts 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. MOP 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 2013 are $ 190 million ($ 25 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 2013 are:


1. Compute the manufacturing cost per unit for each product produced in July 2013.
2. Suppose that in August 2013, production was 90 million units of Supreme, 140 million units of Deluxe, and 160 million units of Regular. Why might the July 2013 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August2013?


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  • CreatedJanuary 15, 2015
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