5. Kaddir Products LLC uses a job order cost system. For a number of months, there has been an ongoing rift between the Sales department and the Production department concerning a special order product, SPL1. This is a seasonal product that is manufactured in batches of 1,000 units. It is sold at cost plus a mark-up of 40% of cost. The Sales department is unhappy because The Production department maintains fluctuating unit production costs that each job order must be fully costed significantly affect selling prices causing on the basis of the costs incurred during excessive customer complaints and the the period in which the goods are loss of considerable orders for SPL1. produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Mr Nidal, president of the company, asks you as the company accountant to collect quarterly data for the past year on SPL1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 100,000 60,000 105,000 265,000 5 53,000 Quarter 2 220,000 80,000 132,000 48,000 153,000 97,000 505,000 225,000 11 4 45,909 56,250 4 200,000 120,000 125,000 445,000 10 44,500 Instructions Answer the following questions (Total 25 marks) (a) What manufacturing cost element is responsible for the fluctuating unit costs? Why? (05 marks) (b) What is your recommended solution to the problem of fluctuating unit cost? (10 marks) (c) Restate the quarterly data on the basis of your recommended solution (10 marks)