Exercise 2-13 Varying 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 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 Fourth Third Second $240,000 $120,000 $ 60,000 $180,000 40,000 206,000 194,000 First Direct materials 60,000 ? 20,000 80,000 230,000 Direct labor Manufacturing overhead ? $550,000 $366,000 $274,000 $ Total manufacturing costs (a) 40,000 6.85 $ 120,000 160,000 3.44 $ 80,000 4.58 $ Number of units to be produced (b) Estimated unit product cost (a+b) 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-a. Using the high-low method, estimate the fixed manufacturing overhead cost per quarter and the variable manufacturing overhead cost per unit. (Round the "Variable manufacturing overhead per unit" to 2 decimal places.) Fixed manufacturing overhead cost per quarter Variable manufacturing overhead per unit 1-b. Compute the total manufacturing cost and unit product cost for the fourth quarter. (Round the "Unit product cost" to 2 decimal places.) Total manufacturing cost Unit product cost 3. Estimate the total manufacturing overhead cost for the year and an annual predetermined overhead rate. (Round the "Predetermined overhead rate" to 2 decimal places.) Total manufacturing overhead cost Predetermined overhead rate per unit