Reference no: EM132612198

DoWeCheatem Inc. produces three different paper products at its St. Hyacin plant-Best, Better, and Good. Each product has its own dedicated production line at the plant. The company 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 ($50 million of which are fixed). This total amount is allocated to each product line on the basis of direct manufacturing labour costs of each line.

Summary data (in millions) for May 2018 are

                                                                             BEST                                BETTER                               GOOD

Direct Material Cost                                    $84                            $54                               $62

Direct Manufacturing Labour Costs                   14                             28                              8

Indirect Manufacturing Costs                             24                             48                          42

Production                                                     95 Kg                         130 Kg                        120 Kg

Question 1: For the the total manufacturing cost per kilogram for each product produced in May 2018. and the total variable manufacturing cost per kilogram for each product produced in May 2018.

Question 2: Suppose that in June 2018, production was 120 million kilograms of Best, 160 million kilograms of Better, and 180 million kilograms of Good. Why might the May 2018 information on total manufacturing costs per kilogram be misleading when predicting total manufacturing costs in June 2018