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Dura Drums Ltd. (located in Jamaica) experiences wide variation in demand for the 500 tre steel drums at fabricates. The leakproof, rustproof steel drums have
Dura Drums Ltd. (located in Jamaica) experiences wide variation in demand for the 500 tre steel drums at fabricates. The leakproof, rustproof steel drums have a variety of uses, from storing liquids and bulk materials to serving as makeshift musical instruments. The drums are made to order and are painted according to the customer's specifications often in bright patterns and designs. The company is well known for the artwork that appears on its drums. Unit costs are computed on a quarterly basis by dividing each quarter's manufacturing costs (materials, labour and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are as follows: Direct materials Direct labour Manufacturing overhead Total manufacturing costs Number of units to be produced Estimated cost per unit First Quarter Third Second Fourth $ 720,000 $ 360,000 $150,000 $540,000 128,000 600,000 64,000 32,000 520,000 480,000 96,000 560,000 $1,448,000 5 944,000 $ 692,000 $1,196,000 80,000 40,000 20,000 60,000 18.10 $ 23.60 S 34.60 $ 19.93 $ Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company's overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production. Required: 1. What would be the predetermined manufacturing overhead rate for the year on the basis of total units to be produced? (Round your answer to 2 decimal places.) Predetermined overhead rate per unit Help 2. Recompute the company's unit costs in accordance with your recommendations in part (1). (Round "Unit product cost to 2 decimal places.) Direct materials Direct labour Manufacturing overhead Total cost Number of units produced Unit product cost Quarter Second Thing Fourth
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