For the year 2015:

Purchases of direct materials $650,000,000

Depreciation - plant and equipment 160,000,000

Plant supervisory salaries 10,000,000

plant and equipment depreciation are related to the manufacture of 1 million units of product for the year ended 31 December 2015

plant and equipment depreciation behaves as a fixed cost

1) Evaluate the unit cost for plant and equipment depreciation. Assume that yearly plant and equipment depreciation is computed on a straight-line basis.

2) Assume that the implied cost- behaviour patterns persist. Repeat the computations in requirement (1) , assuming that the cost are being predicted for the manufacture of 1.2 million units of product. Explain how the total cost would be affected

3) As a management accountant, explain concisely to the president why the unit costs differed in requirements (1) and (2)