MassachusettsMassachusetts

Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July

20172017

are

$ 200$200

million

($ 24$24

million of which are fixed). This total amount is allocated to each product line on the basis of the direct manufacturing labor costs of each line. Summary data (in millions) for July

20172017

are as follows

	Supreme	Deluxe	Regular
Direct material costs	$83	$59	$67
Direct manufacturing labor costs	$17	$24	$39
Manufacturing overhead costs	$48	$85	$67
Units produced	100	120	110

Using the formula you determined above, calculate the company's total manufacturing cost per unit for each type of product produced in July

20172017.

(Round your answers to the nearest cent.)

	Supreme	Deluxe	Regular
Total manufacturing cost per unit produced in July

Requirement 2. Suppose that, in August

20172017,

production was

140140

million units of Supreme,

160160

million units of Deluxe, and

190190

million units of Regular. Why might the July

20172017

information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August

20172017?

During July

20172017,

the company incurred

$ 200$200

million of manufacturing overhead costs, which includes a

$ 24 million fixed$24 million fixed

$ 24 million variable$24 million variable

$ 80 million variable$80 million variable

$ 200 million fixed$200 million fixed

cost component that

will fluctuate

will not fluctuate

with changes in monthly production volume. Thisamount, which

has

has not

been allocated to the total manufacturing costs of producing each product,

affects

has no effect on

the total manufacturing cost per unit amounts as calculated in requirement 1.

Given the production volume

decrease

increase

in August

20172017,

using the total manufacturing cost per unit amounts calculated for July

20172017

will result in

an accurate estimation

an overestimation

an underestimation

of total manufacturing costs for August.