Allocating overhead for product costing Abbott Manufacturing Company produced 500 units of inventory in January 2006. The company expects to produce an additional 5,900 units of inventory during the remaining 11 months of the year, for total estimated production of 6,400 units in 2006. Direct materials and direct labor costs are $74 and

$84 per unit, respectively. Abbott expects to incur the following manufacturing overhead costs during the 2006 accounting period:

Indirect materials $ 6,800 Depreciation on equipment 104,000 Utilities cost 29,200 Salaries of plant manager and staff 304,000 Rental fee on manufacturing facilities 84,000 Total $528,000 Required

a. Determine the estimated cost of the 500 units of product made in January.

b. Is the cost computed in Requirement a actual or estimated? Could Abbott improve accuracy by waiting until December to determine the cost of products? Identify two reasons that a manager would want to know the cost of products in January. Discuss the relationship between accuracy and relevance as it pertains to this problem.