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.