Requirement 2. Suppose that, in August

2020,

production was

130

million units of Supreme,

170

million units of Deluxe, and

190

million units of Regular. Why might the July

2020

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

2020?

During July

2020,

the company incurred

$140

million of manufacturing overhead costs, which includes a

$ 30 million fixed$30millionfixed

cost component that

will fluctuate

with changes in monthly production volume. This amount, which

has

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

has no effect on

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