Account analysis method. Gower Inc., a manufacturer of plastic products, reports the fol- lowing manufacturing costs and account analysis classification for the year ended December 31, 2009.

Gower Inc., produced 75,000 units of product in 2009. Gower’s management is estimating costs for 2010 based on 2009 numbers. The following additional information is available for 2010:

a. Direct materials prices in 2010 are expected to increase by 5% compared with 2009.

b. Under the terms of the labour contract, direct manufacturing labour wage rates are expected to increase by 10% in 2010 compared with 2009.

c. Power rates and wage rates for supervision, materials-handling, and maintenance are not expected to change from 2009 to 2010.

d. Amortization 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 2010.
REQUIRED 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2010. Estimate total manufacturing costs for 2010.
2. Calculate Gower’s total manufacturing cost per unit in 2009 and estimated total manufacturing cost per unit in 2010.
3. How can you get better estimates of fixed and variable costs? Why would these better estimates be useful to Gower?LO1

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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 Amortization 0% variable 95,000 Rent, property taxes, and administration 0% variable 100,000