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Springfield Manufacturing produces electronic storage devices, and uses the following three-part ...

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Springfield Manufacturing produces electronic storage devices, and uses the following three-part ...

Springfield Manufacturing produces electronic storage devices, and uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labour, and indirect manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were allocated to each product on the basis of direct manufacturing labour costs of each line. Summary data for January for the most popular electronic storage device, the Big Bertha, was:

   Big Bertha
Direct manufacturing material costs   $9,000,000
Direct manufacturing labour costs   $3,000,000
Indirect manufacturing costs   $8,500,000
Units produced   40,000

Required:
a.   Compute the total manufacturing cost per unit for each product produced in January.
b.   Suppose production will be reduced to 30,000 units in February. If indirect manufacturing costs include fixed costs then explain if the total cost per unit be higher or lower than in January.

Textbook

Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7^th

Authors: Horngren, Datar, Rajan, Beaubien

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