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Exercise 5-12 Varying Predetermined Overhead Rates Jacarda Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are

Exercise 5-12 Varying Predetermined Overhead Rates

Jacarda Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed on a quarterly basis by dividing each quarters manufacturing costs (materials, labour, and overhead) by the quarters production in units. The companys estimated costs, by quarter, for the coming year are given below:

Quarter
First Second Third Fourth
Direct materials $ 554,400 $ 277,200 $ 138,600 $ 415,800
Direct labour 277,200 138,600 69,300 207,900
Manufacturing overhead 365,400 340,200 327,600 352,800
Total manufacturing costs $ 1,197,000 $ 756,000 $ 535,500 $ 976,500
Number of units to be produced 84,000 42,000 21,000 63,000
Estimated unit product cost $ 14.25 $ 18.00 $ 25.50 $ 15.50

1.

Calculate the predetermined overhead rate based on units and direct labour?

2.

Recompute the companys unit product costs in accordance with your recommendations in (1) above.

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