Benoit Inc. a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended 12/31/2017. Benoit Inc. produced 72,500 units of product in 2017. Benoit management is estimating costs for 2018 on the basis of 2017 numbers.

Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018. Estimate total manufacturing costs for 2018. 2. Calculate Benoit's total manufacturing cost per unit in 2017, and estimate total manufacturing cost per unit in 2018. 3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Benoit? Direct materials All variable $ 290,000 Direct manufacturing labor All variable 181,250 Power All variable 36,250 Supervision labor 20% variable 43,500 Materials-handling labor 50% variable 72,500 Maintenance labor 50% variable 58,000 Depreciation 0% variable 100,000 Rent, property taxes, and administration 0% variable 105,000 b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 4% in 2018 compared with 2017. c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2017 to 2018. d. Depreciation costs are expected to increase by 9%, and rent, property taxes, and administration costs are expected to increase by 11%. e. Benoit expects to manufacture and sell 80,000 units in 2018. Benoit, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2017. Benoit, Inc., produced 72,500 units of product in 2017. Benoit 's management is estimating costs for 2018 on the basis of 2017 numbers. The following additional information is available for 2018. 2(Click the icon to see the additional information.) Read the requirements. (Click the icon to see the account information.) Knowing the behavior of a cost is crucial in estimating future costs. As you will see in this example the manner in which fixed costs, variable costs, and mixed costs behave dictates how they are estimated. We have been given the cost classifications of each account. This will determine how we will calculate the 2018 estimates. In order to complete this problem, we need to understand the three different types of cost behaviors. Fixed- A cost that does not vary with changes in the level of the activity. Variable- A cost that changes as the levels of activity change. Mixed- A cost that has both fixed and variable elements. We know that Benoit, Inc., produced 2014 ardies tof estichatbithe variable costs for, we must know the variable costs per unit. Then we can cost per unit amounts to determine the variable costs for each account if the company manufactures and sells units in 2015. We have been told that certain total account values contain only a portion of variable costs. Requirement 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category 2018. Estimate total in manufacturing costs for 2018. To assist you, we will calculate the variable unit cost of each account using the following formula. Notice that we do not have to calculate variable unit costs for Depreciation or Rent, property taxes, and administration since no portion of these costs are variable. (Round the unit cost to the nearest cent. Complete all input fields. If there is no price increase enter 0.) 2017 2018 100% + Variable unit cost in 2018 [( Total cost * Variable % of cost )+ Total units prod. ] % increase % = Dir. materials % )+ % = Dir. mfg. labor [( ) + ]x % = Power [( )+ ]* % = Super. labor [( ]x %= Mtl. hand. labor [( % = Main. labor [( % = Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018. Let's begin by calculating the total variable costs in 2018. Use the unit costs you calculated above and the predicted 2018 unit production of units to calculate the cost amounts. Remember, depreciation and rent, property taxes and administration do not have a variable element. (Round the costs to the nearest dollar.) Total variable costs in 2018 Account Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation 0 Rent, prop. taxes, and admin. Total Before we can calculate the total fixed costs in2018, we need to determine the amount of fixed costs contained in each mixed cost account in 2014. You can isolate the amount of fixed costs using the following formula. 2017's Fixed element of cost account Total cost -(Variable unit cost x Total units prod. )= -( Super. labor Mtl.-hand labor -( Main. labor -( Now determine the total fixed costs in 2018 using the amounts you calculated above and the information given to you. Make sure you to the additional information to determined the company expects the fixed costs to increase or not. Remember, direct materials, direct manufacturing labor, and power are 100% variable. Total fixed costs in 2018 Direct materials 0 Direct manufacturing labor 0 Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, and admin. Finally, calculate the total costs in 2015 for each account. Total variable costs in 2018 Total fixed costs in 2018 $ Total costs in 2018 Account Direct materials $ 0 Direct manufacturing labor 0 Power 0 Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, prop, taxes, and admin Total Requirement 2. Calculate Loucraffs total manufacturing cost per unit in 2014, and estimate total manufacturing cost per unit in 2015. Use the formula below to calculate the total manufacturing cost per unit. (Round the unit cost to the nearest cent.) Total costs for year Total units prod. for year = Total mg. cost per unit per unit 2017 2018 S per unit Requirement 3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Loucraft? Cost classification into variable and fixed costs is based on qualitative, rather than quantitative, analysis. How good the classifications are depends on the knowledge of individual managers who classify the costs. Loucraft may want to undertake quantitative analysis of costs, using regression analysis on time-series or cross-sectional data to better estimate the fixed and variable components of costs. Better knowledge of fixed and variable costs will help Loucraft to better price his products, to know when he is getting a positive contribution margin, and to better manage costs. 1: Data Table Account Amount Classification All variable S Direct materials Direct manufacturing labor All variable Power All variable Supervision labor %variable Materials-handling labor % variable Maintenance labor % variable Depreciation % variable Rent, property taxes, and administration % variable 2: More Info a. Direct materials prices in 2018 are expected to increase by % compared with 2017. b. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by % in 2018 compared with 2017. c. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2017 to 2018. d. Depreciation costs are expected to increase by %, and rent, property taxes, and administration costs are expected to increase by e. Benoit expects to manufacture and sell units in in 2018. 3: Requirements 1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2015. Estimate total manufacturing costs for 2015 2. Calculate Loucraft's total manufacturing cost per unit in 2014, and estimate total manufacturing cost per unit in 2015. 3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Loucraft