Reference no: EM131129748

Steel Company USA is a metal fabricating business that sells products mainly to the home construction market. The data table that follows should be used in this assignment. The problems are at the end of the data table.

Inputs	Costs
Sandpaper	$4,000
Materials - handling costs	$140,000
Lubricants and coolants	$10,000
Misc indirect labor	$80,000
Misc direct labor	$600,000
Direct materials inv Jan 1, 2010	$80,000
Direct materials inv Dec 31, 2010	$100,000
Finished goods inv, Jan 1, 2010	$200,000
Finished goods inv, Dec 31, 2010	$300,000
WIP Jan 1, 2010	$20,000
WIP Dec 31, 2010	$28,000
Plant lease costs	$108,000
Depreciation - PPE	$72,000
Property taxes	$8,000
Insurance	$6,000
Direct materials purchased	$920,000
Revenues	$2,720,000
Marketing Promo	$120,000
Marketing Salaries	$200,000
Distribution costs	$140,000
Customer service costs	$200,000

1. Using the information in the table, create an income statement with a schedule for costs of goods manufactured. Make sure that for the costs you classify if they are direct or indirect and indicate if they are variable or fixed.

2. Let's assume that both direct material costs and plant leasing costs are for the production of 1,800,000 units. What would be the direct material cost of each of these units produced? Plant leasing cost per unit? Plant leasing should be a fixed cost here.

3. Now let's assume we build 2,000,000 units next year. Repeat the calculations in item #2 above for direct materials and plant leasing costs.

4. Explain why the unit costs for direct materials didn't change in numbers 2 and 3, but the unit costs for the plant lease did.