Gower Ltd., 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
|
350,000
|
|
Direct manufacturing labour
|
All variable
|
280,000
|
|
Power
|
All variable
|
70,000
|
|
Supervision labour
|
15% Variable
|
70,000
|
|
Materials-handling labour
|
60% variable
|
52,500
|
|
Maintenance labour
|
50% variable
|
70,000
|
|
Depreciation
|
0%
|
98,000
|
|
Rent, property taxes, and administration
|
0%
|
105,000
|
Gower Ltd, produced 70,000 units of product in 2014. Gower's 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 contract, direct manufacturing labour wage rates are expected to increase by 4% 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 8%, and rent, property taxes, and administration costs are expected to increase by 9%.
e. Gower, Inc., expects to manufacture and sell 80,000 units in 2015.
Required:
1. Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2015. Estimate total manufacturing costs for 2015.