Question
2-16 Computing and interpreting manufacturingunit costs.Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product
2-16 Computing and interpreting manufacturingunit costs.Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July 2011 are $150 million ($15 million of which are fixed). This total amount is allocated to each product line on the basis of the direct manufacturing labor costs of each line. Summary data (in millions) for July 2011 are as follows:
2. If the cost object were the mixing department rather than units of production of each kind of bread, which preceding costs would now be direct instead of indirect costs? 2-18 Classification of costs, service sector.Consumer Focus is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $50per session to provide comments on new products. These focus groups meet in hotels and are led by a trained, independent, marketing specialist hired by Consumer Focus. Each specialist is paid a fixed retainer to conduct a minimum number of sessions and a per session fee of $2,000. A Consumer Focus staff member attends each session to ensure that all the logistical aspects runsmoothly.
| Supreme | Deluxe | Regular |
Direct Material Costs | $89 | $57 | $60 |
Direct Manufacturing Labor Costs | $16 | $26 | $8 |
Manufacturing Overhead Costs | $48 | $78 | $24 |
Units Produced | 125 | 150 | 140 |
1. Compute the manufacturing cost per unit for each product produced in July 2011.
2. Suppose that in August 2011, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2011 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 2011?
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