Question
Hamwey, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2014. Account Classification
Hamwey, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2014.
Account | Classification | Amount |
Direct materials | All variable | $271,250 |
Direct manufacturing labor | All variable | 193,750 |
Power | All variable | 19,375 |
Supervision labor | 25% variable | 31,000 |
Materials-handling labor | 60% variable | 62,000 |
Maintenance labor | 50% variable | 69,750 |
Depreciation | 0% variable | 95,000 |
Rent, property taxes, and administration | 0% variable | 115,000 |
Hamwey, Inc., produced 77,500 units of product in 2014. Hamwey's management is estimating costs for 2015 on the basis of 2014 numbers. The following additional information is available for 2015.
a. | Direct materials prices in 2015 are expected to increase by 88% compared with 2014. | ||||||
b. | Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 12% in 2015 compared with 2014. | ||||||
c. | Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2014 to 2015. | ||||||
d. | Depreciation costs are expected to increase by 99%, and rent, property taxes, and administration costs are expected to increase by 88%. | ||||||
e. | Hamwey expects to manufacture and sell 87,500 units in 2015.
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