Exercises

$2-11$ Computing and interpreting manufacturing unit costs. 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:

Compute the manufacturing cost per unit for each product produced in July $2013.$

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 manulacturing costs in August $2013?$