The Kiln Burning Department of the Delaware Chemical Company typically has little work in process at the end of the month. The controller of the company has studied the cost and production records of the department for the past several years and has expressed concern over the overhead and labor cost behavior in the department. The costs per unit of these elements have increased substantially in the summer months, although materials costs per unit have remained fairly con- stant in each month. For example, the data below show the costs per equivalent unit during the last 12 months. A similar pattern was found in other years.

1. List some other factors that might logically explain this cost behavior.
2. Assume that the controller has investigated the situation and has found the following:

a. Production workers take their vacations in the summer, especially in July or August. Their vacation pay is treated as direct labor.

b. During vacation periods, the kilns and tanks are cleaned and repaired and all costs of these activities are charged to the Kiln Department’s overhead.
The controller expresses her belief that these huge variations in unit cost are misleading and asks you, as cost accountant, to suggest accounting procedures that will yield “more logical” results. Write a brief report responding to the controller’s request.

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Cost per Unit Materials Labor Overhead $15.01 $ 9.00 $3.00 January February 14.98 8.87 3.20 March 15.03 9.06 3.15 April 15.05 9.03 3.18 May 15.04 9.07 3.26 June 15.06 11.11 3.43 July 15.05 13.52 4.01 August 15.07 15.04 6.92 September 15.04 9.44 3.41 October 15.08 9.28 3.33 November 15.09 9.37 3.37 December 15.07 9.45 3.34