Answer the following questions using the information below:
Merrill Company makes a household appliance with model number X800. The goal for 2012 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X800 units that can be produced. The industry market size for appliances increased 5% from 2011 to 2012. The following additional data are available for 2011 and 2012:
-What is the cost effect of the growth component for direct materials?
Definitions:
Machine-Hours
The total time machines are operated within a certain period, often used to allocate manufacturing overhead.
Manufacturing Overhead
All manufacturing costs that are not directly associated with the production of goods, such as salaries of supervisors and the cost of factory utilities.
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base.
Machine-Hours
A measure of production or work volume that indicates the amount of time a machine has been operating.
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