Interpretation of statements (continuation of 2-36). Refer to the preceding problem. @oe 1. Total prime costs $145 REQUIRED 1. Calculate total prime costs and total conversion costs.

2. Compute total inventoriable costs and period costs.

3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product costs? Give an example.

4. Suppose that both the direct materials used and the plant amortization 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 amortization?

Assume that yearly amortization is computed on a straight-line basis.

5. Assume that the implied cost behaviour patterns in requirement 4 persist. ‘That is, midnmeatee ne Tice:

direct materials costs behave as a variable cost and plant amortization behaves as a fixed cost. Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of 1.5 million units of product. How would the total costs be affected?

6. Assume that amortization on the equipment (but not the plant) is computed based on the number of units produced because the equipment deteriorates with units produced. The amortization rate on equipment is $4 per unit. Calculate the amortization on equipment assuming

(a) | million units of product are produced and

(b) 1.5 million units of product are produced.

LO1