Hamwey, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2020.

Required

Hamwey, Inc., produced 75,000 units of product in 2020. Hamwey’s management is estimating costs for 2021 on the basis of 2020 numbers. The following additional information is available for 2021.
a. Direct materials prices in 2021 are expected to increase by 8% compared with 2020.
b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 8% in 2021 compared with 2020.
c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2020 to 2021.
d. Depreciation costs are expected to increase by 10%, and rent, property taxes, and administration costs are expected to increase by 9%.
e. Hamwey expects to manufacture and sell 82,500 units in 2021.
1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2021. Estimate total manufacturing costs for 2021.
2. Calculate Hamwey’s total manufacturing cost per unit in 2020, and estimate total manufacturing cost per unit in 2021.
3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Hamwey?

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Account Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, and administration Classification All variable All variable All variable 25% variable 50% variable 50% variable 0% variable 0% variable Amount $337,500 262,500 75,000 60,000 105,000 45,000 88,000 110,000