ClassificationAccountAmountDirect materialsAll variable$300,000Direct manufacturing laborAll variable225,000PowerAll variable37,500Supervision laborMaterials-handling labor20% variable56,25050% variable60,000Maintenance labor40% variable75,000DepreciationRent, property taxes, and administration0% variable95,0000% variable100,000 Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018.Estimate total manufacturing costs for 2018.Calculate Gower's total manufacturing cost per unit in 2017, and estimate total manufacturing cost perunit in 2018.Required1.2.How can you obtain better estimates of fixed and variable costs? Why would these better estimates beuseful to Gower?3.

Question
Asked Jan 17, 2020
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Account analysis method. Gower, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2017.

Gower, Inc., produced 75,000 units of product in 2017. Gower’s management is estimating costs for 2018 on the basis of 2017 numbers. The following additional information is available for 2018.

  1. Direct materials prices in 2018 are expected to increase by 5% compared with 2017.
  2. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 10% in 2018 compared with 2017.
  3. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change from 2017 to 2018.
  4. Depreciation costs are expected to increase by 5%, and rent, property taxes, and administration costs are expected to increase by 7%.
  5. Gower expects to manufacture and sell 80,000 units in 2018.
Classification
Account
Amount
Direct materials
All variable
$300,000
Direct manufacturing labor
All variable
225,000
Power
All variable
37,500
Supervision labor
Materials-handling labor
20% variable
56,250
50% variable
60,000
Maintenance labor
40% variable
75,000
Depreciation
Rent, property taxes, and administration
0% variable
95,000
0% variable
100,000
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Classification Account Amount Direct materials All variable $300,000 Direct manufacturing labor All variable 225,000 Power All variable 37,500 Supervision labor Materials-handling labor 20% variable 56,250 50% variable 60,000 Maintenance labor 40% variable 75,000 Depreciation Rent, property taxes, and administration 0% variable 95,000 0% variable 100,000

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Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018.
Estimate total manufacturing costs for 2018.
Calculate Gower's total manufacturing cost per unit in 2017, and estimate total manufacturing cost per
unit in 2018.
Required
1.
2.
How can you obtain better estimates of fixed and variable costs? Why would these better estimates be
useful to Gower?
3.
help_outline

Image Transcriptionclose

Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2018. Estimate total manufacturing costs for 2018. Calculate Gower's total manufacturing cost per unit in 2017, and estimate total manufacturing cost per unit in 2018. Required 1. 2. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to Gower? 3.

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