Homework Soursehow did they get the 64 annual fixed cost CapitolaCapitola M
how did they get the 64 annual fixed cost?
CapitolaCapitola
Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company\'s production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers,
PacificPacific
Wholesale, due to large fluctuations in price. The owner of
CapitolaCapitola
has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year:
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(Click the icon to view additional information.) Read the requirements
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.
Requirement 1 and 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate.
First identify the formula to calculate the total manufacturing cost per unit, then enter the appropriate amounts to calculate the total cost per unit for second and third quarter based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate for the year. (Abbreviation used: OH = overhead, mat. = materials, and Var. = variable.)
Total cost
Direct mat. per unit
+
Direct labor per unit
+
Var. OH per unit
+
Fixed OH per unit
=
per unit
Qtr 2
$65
+
40
+
32
+
50
=
$187
Qtr 3
$65
+
40
+
32
+
200
=
$337
Annual
$65
+
40
+
32
+
64
=
201
CapitolaCapitola
Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company\'s production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers,
PacificPacific
Wholesale, due to large fluctuations in price. The owner of
CapitolaCapitola
has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year:
LOADING...
(Click the icon to view the budgeted information.)
LOADING...
(Click the icon to view additional information.) Read the requirements
LOADING...
.
Requirement 1 and 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate.
First identify the formula to calculate the total manufacturing cost per unit, then enter the appropriate amounts to calculate the total cost per unit for second and third quarter based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate for the year. (Abbreviation used: OH = overhead, mat. = materials, and Var. = variable.)
Total cost
Direct mat. per unit
+
Direct labor per unit
+
Var. OH per unit
+
Fixed OH per unit
=
per unit
Qtr 2
$65
+
40
+
32
+
50
=
$187
Qtr 3
$65
+
40
+
32
+
200
=
$337
Annual
$65
+
40
+
32
+
64
=
$201
Requirement 3.
CapitolaCapitola
Manufacturing prices its surfboards at manufacturing cost plus 20%. Why might
PacificPacific
Wholesale be seeing large fluctuations in the prices of boards? Which of the methods described in requirements 1 and 2 would you recommend
CapitolaCapitola
use? Explain.
CapitolaCapitola
should use the budgeted
annual
manufacturing overhead rate because capacity decisions are based on
longer quarterly periods rather than annual periods.
Prices
should
vary based on quarterly fluctuations in production.
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Data Table
Quarter
1
2
3
4
Surfboards manufactured and sold
500
400
100
250
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More Info
It takes
22
direct manufacturing
labor-hourshours
to make each board. The actual direct material cost is
$ 65.00$65.00
per board. The actual direct manufacturing labor rate is
$ 20$20
per hour. The budgeted variable manufacturing overhead rate is
$ 16$16
per direct manufacturing labor-hour. Budgeted fixed manufacturing overhead costs are
$ 20 comma 000$20,000
each quarter.
PrintDone
| Total cost | |||||||||
| Direct mat. per unit | + | Direct labor per unit | + | Var. OH per unit | + | Fixed OH per unit | = | per unit | |
| Qtr 2 | $65 | + | 40 | + | 32 | + | 50 | = | $187 |
| Qtr 3 | $65 | + | 40 | + | 32 | + | 200 | = | $337 |
| Annual | $65 | + | 40 | + | 32 | + | 64 | = | 201 |
Solution
Annual fixed cost= Budgeted fixed overhead cost per year ( per quarter amount *4)/ total production
Budgeted fixed overhead per year= 20000*4= 80000
Total production = 500+400+100+250= 1250
Fixed cost per board= 80000/1250 =64
