Interpretation of statements (continuation of 2-18). (20-25 minutes)

Refer to the preceding problem.  l01 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 Gncluded 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 behaviour 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. Asa management accountant, explain concisely to the president why the unit costs differed in requirements 4 and 5.