A manufacturer of plastic Products, reports the following manufacturing costs and account analysis classification for the year ended December? 31, 2014
Account Classification Amount
Direct materials All variable $271,250
Direct manufacturing labor All variable 193,750
Power All variable 19,375
Supervision labor 25% variable 31,000
Materials-handling labor 60% variable 62,000
Maintenance labor 50% variable 69,750
Depreciation 0% variable 110,000
Rent, property taxes, and administration 0% variable 105,000 .
The company produced 77,500 units of product in 2014. Management is estimating costs for 2015 on the basis of 2014 numbers. The following additional information is available for 2015
a. Direct materials prices in 2015 are expected to increase by 4 ?% compared with 2014 .
b. Under the terms of the labor? contract, direct manufacturing labor wage rates are expected to increase by 8 ?% in 2015 compared with 2014.
c. Power rates and wage rates for? supervision, materials handling, and maintenance are not expected to change from 2014 to 2015 .
d. Depreciation costs are expected to increase by 10 ?%, and rent, property taxes, and administration costs are expected to increase by 12 ?%.
e. They expects to manufacture and sell 87500 units in 2015 .
1. Prepare a schedule of? variable, fixed, and total manufacturing costs for each account category in 2015. Estimate total manufacturing costs for 2015.
2. Calculate Hamwey's total manufacturing cost per unit in 2014? and estimate total manufacturing cost per unit in 2015.
3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful to the company?