Minnesota Office Products produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular.
Question:
Minnesota Office Products 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 2020 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 2020 are as follows:
Required
1. Compute the manufacturing cost per unit for each product produced in July 2020.
2. Suppose that, in August 2020, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2020 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2020?
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9781292363073
17th Global Edition
Authors: Srikant Datar, Madhav Rajan