Springfield Manufacturing Produces Electronic Storage Devices,and Uses the Following Three-Part

question 121

Essay

Springfield Manufacturing produces electronic storage devices,and uses the following three-part classification for its manufacturing costs: direct materials,direct manufacturing labor,and indirect manufacturing costs.Total indirect manufacturing costs for January were $300 million,and were allocated to each product on the basis of direct manufacturing labor costs of each line.Summary data (in millions)for January for the most popular electronic storage device,the Big Bertha,was:
$$\begin{array} { | l | c | } \hline & \text { Big Bertha } \\\hline \text { Direct manufacturing costs } & \$ 4,500,000 \\\hline \text { Direct manufacturing labor costs } & \$ 1,500,000 \\\hline \text { Indirect manufacturing costs } & \$ 4,250,000 \\\hline \text { Units produced } & 40,000 \\\hline\end{array}$$ Required:
a.Compute the manufacturing cost per unit for each product produced in January.
b.Suppose production will be reduced to 30,000 units in February.Speculate as to whether the unit costs in February will most likely be higher or lower than unit costs in January; it is not necessary to calculate the exact February unit cost.Briefly explain your reasoning.

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Definitions:

Trade Barriers

Measures implemented by governments to restrict or discourage international trade, such as tariffs, quotas, and embargoes.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, indicative of a thriving economic condition.

Euro

The official currency of the Eurozone, which is used by many of the member states of the European Union.

Common Currency

A currency that is used by several countries, facilitating easier trade and economic stability within those regions; the Euro is a well-known example.