Question

Maximum Office Products (MOP) produces three different paper products at its Vernon 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 labour, and indirect manufacturing costs. Total indirect manufacturing costs of the plant in May 2012 are $150 million ($20 million of which are fixed). This total amount is allocated to each product line on the basis of direct manufacturing labour costs of each line. Summary data (in millions) for May 2012 are
REQUIRED
1. Compute the total manufacturing cost per kilogram for each product produced in May 2012. Compute the total variable manufacturing cost per kilogram for each product produced in May 2012.
2. Suppose that in June 2012, production was 120 million kilograms of Supreme, 160 million kilograms of Deluxe, and 180 million kilograms of Regular. Why might the May 2012 information on total manufacturing costs per kilogram be misleading when predicting total manufacturing costs in June 2012?


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  • CreatedJuly 31, 2015
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