2-34 Income statement and schedule of cost of goods manufactured. The Howell Corporation has the following account balances (in millions):

For Specific Date For Year 2014

Direct materials inventory, Jan. 1, 2014 $15 Purchases of direct materials $325

Work-in-process inventory, Jan. 1, 2014 10 Direct manufacturing labor 100

Finished goods inventory, Jan. 1, 2014 70 Depreciationplant and equipment 80

Direct materials inventory, Dec. 31, 2014 20 Plant supervisory salaries 5

Work-in-process inventory, Dec. 31, 2014. 5 Miscellaneous plant overhead 35

Finished goods inventory, Dec. 31, 2014 55 Revenues 950

Marketing, distribution, and customer- service costs 240

Plant supplies used 10

Plant utilities 30

Indirect manufacturing labor 60

Prepare an income statement and a supporting schedule of cost of goods manufactured for the year ended December 31, 2014. (For additional questions regarding these facts, see the next problem.)

1. 2-35 Interpretation of statements (continuation of 2-34). Please answer 2-35

1.How would the answer to Problem 2-34 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 managers salary (included in marketing, distribution, and customer-service costs) be accounted for any differently if the Howell Corporation were a merchandising-sector company instead of a manufacturing-sector company? Using the flow of manufacturing costs outlined in Exhibit 2-9 (page 43), describe how the wages of an assembler in the plant would be accounted for in this manufacturing company.

3. Plant supervisory salaries are usually regarded as manufacturing overhead costs. When 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 and equipment depreciation are 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 and equipment depreciation? Assume that yearly plant and equipment depreciation is computed on a straight-line basis.

5. Assume that the implied cost-behavior patterns in requirement 4 persist. That is, direct material costs behave as a variable cost and plant and equipment 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. As a management accountant, explain concisely to the president why the unit costs differed in requirements 4 and 5.