Foxwood Company is a metal- and woodcutting manufacturer, selling products to the homeconstruction market. Consider the following data for 2014 (in thousands):
Sandpaper $ 2
Materials-handling costs 70
Lubricants and coolants 5
Miscellaneous indirect manufacturing labor 40
Direct manufacturing labor 300
Direct materials inventory, 1/1/2014 40
Direct materials inventory, 12/31/2014 50
Finished goods inventory, 1/1/2014 100
Finished goods inventory, 12/31/2014 150
Work-in-process inventory, 1/1/2014 10
Work-in-process inventory, 12/31/2014 14
Plant-leasing costs 54
Depreciation: plant equipment 36
Property taxes on plant equipment 4
Fire insurance on plant equipment 3
Direct materials purchased 460
Revenues 1,360
Marketing promotions 60
Marketing salaries 100
Distribution/shipping costs 70
Customer service costs 100
1. Prepare an income statement with a separate supporting schedule of costs of goods manufactured.
2. Suppose that both the direct material costs and the plant-leasing costs are for the production of 900,000 units. What is the direct material cost of each unit produced? What is the plant-leasing cost per unit? Assume that the plant-leasing cost is a fixed cost.
3. Suppose Foxwood manufactures 1,000,000 units next year. Repeat the computation in requirement 2 for direct materials and plant-leasing costs.
4. As a management consultant, explain to the company president why the unit cost for direct materials did not change in requirements 2 and 3 but the unit cost for plant-leasing costs did change.