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Quiz: Chapter 2 Assignment 1 Time Remaining: 01:05:16 Submit Quiz This Question: 5 pts 1 of 1 This Quiz: 5 pts possible Question Help Mapyland 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 2017 are $160 million ($21 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 2017 are as follows: EB(Click the lcon to view the data.) Read the requirements Requirement 1. Compute the manufacturing cost per unit for each product produced in July 2017 Begin by determining the formula needed to calculate the total manufacturing cost per unit. Direct manufacturing labor costs-Total manufacturing cost per unit Using the formula you determined above, calculate the company's total manufacturing cost per unit for each type of product produced in July 2017. (Round your answers to the nearest cent.) Supreme Deluxe Regular Total manufacturing cost per unit produced in July| the July 2017 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August 20177 During July 2017, the company incurred $160 million of manufacturing Choose from any list or enter any number in the input fields and then continue to the next 150 million units of Deluxe, and 170 million units of Regular. Why might overhead costs, which includes a cost component that

Explanation / Answer

Jul-17 Working Note:1 Apportionment of OVERHEADS using labour costs of each line Supreme Deluxe Regular Total Total manufacturing Labour Costs 15 27 18 60 Overhead Cost Apportionment 40 72 48 160 (15/60*160) (27/60*160) (18/60*160) Calculation of manufacturing cost per unit Amount in millions Particulars Supreme Deluxe Regular Material cost 80 60 68 Total manufacturing Labour Costs 15 27 18 Overheads(WN-1) 40 72 48 Total cost 135 159 134 No of units 80 110 90 (80+15+40) (60+27+72) (68+18+48) Total manufacturing cost per unit 1.688 1.445 1.489 (135/80) (159/110) (134/90) Aug-17 Calculation of Manufacturing cost per unit in august Amount in millions Particulars Supreme Deluxe Regular No ofunits   120 150 170 manufacturing cost per unit in july 1.688 1.445 1.489 Total manufacturing cost 202.5 216.82 253.11 Conclusion 1 The manufacturing cost that are predicted in the month of august are misleading as they have been calculated using july manufacturing cost per unit.It will mislead because manufacturing overhead cost($160) includes fixed manufacturing cost amounting to( $21) Which should not be included in the manufacturing cost of the product because we will incur such cost eventhough production has not been made for example if machinery for producing units has been taken for rent ,such rent will be incurred eventhough production has not been made. 2 More over it also has a severe impact on the stocks because, if fixed costs has been included in the Manufacturingcost of the product ,the closing stock has been overpriced i.e closing inventory has been overpriced to the extent of fixed costs.And also even though requisite sales has not been made, due to above stated reason business will show more profit due to overstatement of fixed costs.

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