Refer to the preceding problem.
Required
1. How would the answer to the preceding problem be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific.
2. Would the sales manager's salary (included in marketing, distribution and customer service costs) be accounted for differently if Howell Ltd were a merchandising company instead of a manufacturing company?
3. Plant supervisory salaries are usually regarded as indirect manufacturing costs. Under what conditions might some of these costs be regarded as direct manufacturing costs? Give an example.
4. Suppose that both the direct materials used and the plant depreciation were related to the manufacture of 1 million units of product. What is the unit cost for the direct materials assigned to those units? What is the unit cost for plant building and equipment depreciation? Assume that yearly plant depreciation is calculated on a straight-line basis.
5. Assume that the implied cost behavior patterns in requirement 4 persist. That is, direct materials costs behave as a variable cost and depreciation behaves as a fixed cost. Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of 1.2 million units of product. How would the total costs be affected?
6. As a management accountant, explain concisely to the CEO why the unit costs differed in requirements 4 and 5.

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For specific date For year 2008 Direct materials, 1 January 2008 Work in progress, 1 January 2008 Finished goods, 1 January 2008 Direct materials, 31 December 2008 Work in progress, 31 December 2008 Finished goods, 31 December 2008 £15 10 70 20 Purchases of direct materials Direct manufacturing labour Depreciation - plant building 325 100 and equipment Plant supervisory salaries Miscellaneous plant overhead Revenues Marketing, distribution and 80 5 55 35 950 customer-service costs Plant supplies used Plant utilities Indirect manufacturing labour 240 10 30 60