Gower Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2016.

Account ..................................................... Classification.............. Amount

Direct materials .................................................All variable............. $300,000

Direct manufacturing labour ..................................All variable............. 225,000

Power ............................................................All variable............. 37,500

Supervision labour .............................................20% variable............ 56,250

Materials-handling labour ....................................50% variable.............. 60,000

Maintenance labour ............................................40% variable.............. 75,000

Depreciation .................................................... 0% variable...............95,000

Rent, property taxes, and administration ....................0% variable..............100,000

Gower Inc., produced 75,000 units of product in 2016. Gower's management is estimating costs for 2017 based on 2016 numbers. The following additional information is available for 2017:

a. Direct materials prices in 2017 are expected to increase by 5% compared with 2016.

b. Under the terms of the labour contract, direct manufacturing labour wage rates are expected to increase by 10% in 2017 compared with 2016.

c. Power rates and wage rates for supervision, materials-handling, and maintenance are not expected to change from 2016 to 2017.

d. Depreciation costs are expected to increase by 5%, and rent, property taxes, and administration costs are expected to increase by 7%.

e. Gower, Inc. expects to manufacture and sell 80,000 units in 2017.

Required

1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2017. Estimate total manufacturing costs for 2017.

2. Calculate Gower's total manufacturing cost per unit in 2016 and estimated total manufacturing cost per unit in 2017.

3. How can you get better estimates of fixed and variable costs? Why would these better estimates be useful to Gower?