Kingsport Containers Company makes a single product with wide seasonal variations in demand. The company uses...
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Kingsport Containers Company makes a single product with 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. Direct materials Direct labor Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) (b) First $ 240,000 120,000 240,000 $ 600,000 120,000 $ 5.00 Second $ 120,000 60,000 216,000 $ 396,000 30,000 204,000 Quarter Third $ 60,000 Fourth $ 180,000 90,000 ? $ ? 90,000 $ ? 60,000 $ 6.60 $ 294,000 30,000 $ 9.80 Management finds the variation in quarterly unit product costs to be confusing. Accordingly, you have been asked to find a more appropriate way of applying 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 unit product cost for the fourth quarter? Kingsport Containers Company makes a single product with 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. Direct materials Direct labor Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) (b) First $ 240,000 120,000 240,000 $ 600,000 120,000 $ 5.00 Second $ 120,000 60,000 216,000 $ 396,000 30,000 204,000 Quarter Third $ 60,000 Fourth $ 180,000 90,000 ? $ ? 90,000 $ ? 60,000 $ 6.60 $ 294,000 30,000 $ 9.80 Management finds the variation in quarterly unit product costs to be confusing. Accordingly, you have been asked to find a more appropriate way of applying 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 unit product cost for the fourth quarter?
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To address the variation in quarterly unit product costs and apply manufacturing overhead more appro... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0077522940
15th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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