Computing and interpreting manufacturing unit costs. Maximum Office Products (MOP) produces three different paper products at its Vernon lumber plant- Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. MOP currently uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labour, and indirect manufacturing costs.

Total indirect manufacturing costs of the plant in May 2018 are $150 million ($20 million of which are fixed). This total amount is allocated to each product line on the basis of direct manufacturing labour costs of each line. Summary data (in millions) for May 2018 are

• Supreme
• Deluxe
• Regular

• Direct materials cost Supreme $84 Deluxe $54 Regular $62
• Direct manufacturing labour costs Supreme 14 Deluxe 28 Regular 8
• Indirect manufacturing costs Supreme42 Deluxe 84 Regular 24
• Production Supreme 90 kilograms Deluxe 120 kilograms Regular 100 kilograms

Required

1. Compute the total manufacturing cost per kilogram for each product produced in May 2018. Compute

the total variable manufacturing cost per kilogram for each product produced in May 2018.

2. Suppose that in June 201 8, production was 120 million kilograms of Supreme, 160 million kilograms of

Deluxe, and 180 million kilograms of Regular. Why might the May 2018 information on total manufacturing

costs per kilogram be misleading when predicting total manufacturing costs in June 2018?