Question

Manitoba Office Products (MOP) produces three different paper products at its Vernon lumber plant-Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. MOP currently uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labour, and indirect manufacturing costs. Total indirect manufacturing costs of the plant in May 2018 are $150 million ($25 million of which are fixed). This total amount is allocated to each product line on the basis of the direct manufacturing labour costs of each line. Summary data (in millions) for May 2018 are provided in the accompanying table EEB (Click the icon to view the summary data.) Required Requirement 1. Use the following table to compute the total manufacturing cost per kilogram and the total variable manufacturing cost per kilogram. (Round your answers to the nearest cent.) Deluxe Regular 50 $ 30 $ 86 $ 166 S Supreme 80 $ 11 S 42 $ 133 S Direct material costs Direct manufacturing labour costs Indirect manufacturing costs Total manufacturing costs Mfg. fixed cost allocation Variable costs Kilograms produced Total manufacturing cost per kg Variable mfg. cost per kg 65 96 70 100 90

Answer 1

Ans: Manitoba Office products (MOP) produces three paper product Supreme, Deluxe and Regular.

Classification of cost as Direct material cost, Direct manufacturing labour cost and Indirect manufacturing cost

Indirect manufacturing cost is $ 150 million for the month of May 2018 out of which $ 25 million is Fixed cost.

Indirect manufacturing cost allocated to each product on the basis of Direct manufacturing labour cost.

Statement of cost

Particulars		Amount ( $ in Million)
		Supreme	Deluxe	Regular
Variable cost
Direct material cost		80	50	65
Direct Manufacturing labour cost		11	30	9
Indirect Manufacturing cost ( Variable portion)		27.5	75	22.5
Variable cost		118.5	155	96.5
Production in Kg		70	100	90
Variable manufacturing cost per Kg (A) ($)		1.69	1.55	1.07
Fixed Indirect manufacturing cost		5.5	15	4.5
Production in Kg		70	100	90
Fixed manufacturing cost per Kg (B) ($)		0.08	0.15	0.05
Total Manufacturing cost per Kg ($)	(A)+(B)	1.77	1.7	1.12

	Working Note
	Computation of Variable cost of Indirect Manufacturing Cost per $ of Direct manufacturing Labour cost
	Particulars		Amount ($)
A	Indirect Manufacturing cost ( Variable portion) ( $ in Million)	(150-25)	125
B	Direct Manufacturing labour cost ($ in Million)	(11+30+9)	50
C	Indirect Manufacturing cost ( Variable portion) per $ of Direct manufacturing labour cost	A/B	2.5
	Computation of Fixed cost of Indirect Manufacturing Cost per $ of Direct manufacturing Labour cost
	Particulars		Amount ($)
A	Indirect Manufacturing cost ( fixed portion) ( $ in Million)		25
B	Direct Manufacturing labour cost ($ in Million)	(11+30+9)	50
C	Indirect Manufacturing cost ( Variable portion) per $ of Direct manufacturing labour cost	A/B	0.5

	Allocation of Indirect Manufacturing Cost
			Amount ($ in Million)
	Particulars		Supreme	Deluxe	Regular
	Direct Manufacturing labour cost		11	30	9
	Indirect Manufacturing cost ( Variable portion)	(11:30:9)*2.5	27.5	75	22.5
	Indirect manufacturing cost (fixed portion )
	Direct Manufacturing labour cost		11	30	9
	Indirect Manufacturing cost ( Fixed portion)	(11:30:9)*0.5	5.5	15	4.5