Computing and interpreting unit manufacturing costs. Finnish Forest Products (FFP)

produces three different paper products at its Vaasa lumber plant—supreme, deluxe, and reg¬

ular. Each product has its own dedicated production line at the plant. FFP currently uses the following three-part classification for its manufacturing costs: direct materials, direct manu¬

facturing labour, and indirect manufacturing costs. Indirect manufacturing costs are allocated to each product line on the basis of direct manufacturing labour costs on each fine. Summary data for the most recent month (July 2007) are (in millions):

Supreme Deluxe Regular Direct materials cost $100.80 $ 64.80

$ 74.40 Direct manufacturing labour costs 16.80 33.60 9.60 Indirect manufacturing costs 50.40 100.80 28.80 Kilograms produced 80 120 100 Required 1. Compute the unit manufacturing cost per kilogram for each product produced inJuly 2007.

2. Suppose that, in August 2007, production was 120 kilograms of Supreme, 160 kilograms of Deluxe, and 180 kilograms of Regular. Why might the July 2007 unit manufacturing cost information be misleading when predicting total manufacturing costs in August 2007?