Exercise 2-11 Varying Plantwide Predetermined Overhead Rates [LO2-1, LO2-2, LO2-3] Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below Quarter Third First $320,000 $160,000 $ 80,000 $240,000 80,000 Second Fourth Direct materials 40,000 216,000 Direct labor 20,000 60,000 Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) + (b) 240,000 204,000 $640,000 $416,000 $304,000 60,000 80,000 8.00 $ 40,000 10.40 $ 20,000 15.20 $ ? Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.60, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next