and 2B Help Save Exit Submit Check my work Exercise 211 Var

and 2B Help Save & Exit Submit Check my work Exercise 2-11 Varying Plantwide Predetermined Overhead Rates (L02-1, LO2-2, LO2-3) Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below: First l SecondThirdlF Direct materials $280,000 $140,000 70,000 $210,000 Direct labor 80,000 40,000 20,000 60,000 230,000 206,000 194,000 Manufacturing overhead Total manufacturing costs (a) $590,000 $386,000 $284, 000S Number of units to be produced (b) 120,00060,00030,000 90,000 Estimated unit product cost (a)(b)4.92 6.43 9.47s Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has beern suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated Prev5 of 7lNext >

Solution

1)Fixed manufacturing overhead included in total manufacturing overhead = Total overhead - variable overhead

                       230000 - [120000*.40]

                       230000 - 48000

                        182000

Overhead cost for quarter = [90000*.40]+182000

                  = 36000+ 182000

                 = 218000

Part4 )

Direct material	280000+140000+70000+210000	700000
Direct labor	80000+40000+20000+60000	200000
Manufacturing overhead	230000+206000+194000+218000	848000
Total manufacturing cost		1748000
Number of units	120000+60000+30000+90000	300000
Unit cost	1748000/300000	$ 5.83