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10-22 Account analysis method. Gower, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December
10-22 Account analysis method. Gower, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2012. Account Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, and administration Classification All variable All variable All variable 20% variable 50% variable 40% variable 0% variable 0% variable Amount $300,000 225,000 37,500 56,250 60,000 75,000 95,000 100,000 Gower, Inc., produced 75,000 units of product in 2012. Gower's management is estimating costs for 2013 on the basis of 2012 numbers. The following additional information is available for 2013. a. Direct materials prices in 2013 are expected to increase by 5% compared with 2012. b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 10% in 2013 compared with 2012. c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2012 to 2013. d. Depreciation costs are expected to increase by 5%, and rent, property taxes, and administration costs are expected to increase by 7%. e. Gower expects to manufacture and sell 80,000 units in 2013. 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2013. Estimate total manufacturing costs for 2013. 2. Calculate Gower's total manufacturing cost per unit in 2012, and estimate total manufacturing cost per unit in 2013. 3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Gower? Required
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