Morgantown Manufacturing Produces Electronic Storage Devices and Uses the Following

Essay

Morgantown Manufacturing produces electronic storage devices and uses the following three-part classification for its manufacturing costs: materials, labor, and support costs. Total support costs for June were $300 million and were allocated to each product on the basis of labor costs of each line. Summary data (in millions) for June for the most popular electronic storage device, the Giant Watt, was:
$\begin{array}{lr}\text { Material costs } & \$ 9,000,00 \\\text { Labor costs } & \$ 3,000,00 \\\text { Support costs } & \$ 8,500,00 \\\text { Units produced } & 40,000\end{array}$

a. Compute the manufacturing cost per unit for each Giant Watt produced in June.
b. Suppose production will be reduced to 30,000 units in July. Speculate as to whether the unit costs in July will most likely be higher or lower than unit costs in June; it is not necessary to calculate the exact July unit cost. Briefly explain your reasoning.