MOP hires Judy Shore, a cost consultant, who discovers that each production line has multiple energy meters, so it is economically feasible to trace $90 million of energy costs directly to the three product lines. The remaining $60 million of manufacturing overhead costs of the plant (including the $20 million of fixed costs) are allocated to each product on the basis of the direct manufacturing labor costs of each line. She reports the following revised numbers for July 2007:

If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/ cost12e and download the template for Exercise 2-17.
Required
1. Why might MOP's managers prefer energy costs to be a direct cost rather than a manufacturing overhead cost?
2. Compute the manufacturing cost per unit for each product line after the cost analysis has been performed by Judy Shore.

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(Gin millions) 10 Minnesota Office Products 11 (after cost analysis by consultant 12 Direct material costs 3 Direct manufacturing labor costs 14 Direct energy costs 15 Other manufacturing overhead costs Supreme Deluxe Regular Total $62 $200 50 90 60 $84 14 28 398 40795 33.6 16.8 9.6 Supreme S84 $14 S42 80 Deluxe Direct material costs Direct manufacturing labor costs Manufacturing overhead costs Units produced $54 $28 $84 120 Regular S62 S 8 S24 100