Chapter 11

Walton Manufacturing estimated its product costs and volume of production for Year 3 by quarter as follows. Walton Company sells a souvenir item at varlous resorts across the country. Its management uses the product's estimated quarterly cost to determine the seling price of its product. The company expects a large variance in demand for the product between quarters due to its seasonal nature. The company does not expect overhead costs, which are predominately fixed, to vary significantly as to production volume or with amounts for previous years. Prices are established by using a cost-plus pricing strategy. The company finds variations in short term unit cost confusing to use. Unit cost varlations complicate pricing decisions and many other decisions for which cost is a consideration. Required a. Based on estimated total production cost, determine the expected quarterly cost per unit for Walton's product b-1. Calculate the predetermined overhead rate. b-2. Calculate the unit cost per quarter based on the predetermined overhead rate