Classification of costs, prime and convt ~>n costs. Tanaka Metal Products reports the following components in its manufacturing ts for April 19_5 (in thousands):

Direct costs:

Direct materials Direct manufacturing labor salaries Subcontracting Manufacturing overhead:

Fringe benefits on direct manufacturing labor Production setup Other manufacturing overhead

¥430 111 120 ¥660 40 60 240 340

¥1,000 Subcontracting costs are treated as a direct cost item separate from direct materials.

Required 1. Compute

(a) the prime costs and

(b) the conversion costs of Tanaka Metal Products using the cost classifications described above.

2. Assume now that Tanaka changes the classification of two items — both benefits for direct manufacturing labor and production setups will now be classified as direct costs. Compute

(a) the prime costs and

(b) the conversion costs of Tanaka after this change in cost classifi- cation, and comment on the results.

3. What information might Tanaka use to change the two items in requirement 2 to be direct cost items rather than manufacturing overhead cost items?