how did they get the 64 annual fixed cost?

CapitolaCapitola

Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company's production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers,

PacificPacific

Wholesale, due to large fluctuations in price. The owner of

CapitolaCapitola

has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year:

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(Click the icon to view the budgeted information.)

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.

Requirement 1 and 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate.

First identify the formula to calculate the total manufacturing cost per unit, then enter the appropriate amounts to calculate the total cost per unit for second and third quarter based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate for the year. (Abbreviation used: OH = overhead, mat. = materials, and Var. = variable.)

									Total cost
	Direct mat. per unit	+	Direct labor per unit	+	Var. OH per unit	+	Fixed OH per unit	=	per unit
Qtr 2	$65	+	40	+	32	+	50	=	$187
Qtr 3	$65	+	40	+	32	+	200	=	$337
Annual	$65	+	40	+	32	+	64	=	201

CapitolaCapitola

Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company's production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers,

PacificPacific

Wholesale, due to large fluctuations in price. The owner of

CapitolaCapitola

has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year:

LOADING...

(Click the icon to view the budgeted information.)

LOADING...

(Click the icon to view additional information.) Read the requirements

LOADING...

.

Requirement 1 and 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate.

First identify the formula to calculate the total manufacturing cost per unit, then enter the appropriate amounts to calculate the total cost per unit for second and third quarter based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate for the year. (Abbreviation used: OH = overhead, mat. = materials, and Var. = variable.)

									Total cost
	Direct mat. per unit	+	Direct labor per unit	+	Var. OH per unit	+	Fixed OH per unit	=	per unit
Qtr 2	$65	+	40	+	32	+	50	=	$187
Qtr 3	$65	+	40	+	32	+	200	=	$337
Annual	$65	+	40	+	32	+	64	=	$201

Requirement 3.

CapitolaCapitola

Manufacturing prices its surfboards at manufacturing cost plus 20%. Why might

PacificPacific

Wholesale be seeing large fluctuations in the prices of boards? Which of the methods described in requirements 1 and 2 would you recommend

CapitolaCapitola

use? Explain.

CapitolaCapitola

should use the budgeted

annual

manufacturing overhead rate because capacity decisions are based on

longer quarterly periods rather than annual periods.

Prices

should

vary based on quarterly fluctuations in production.

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Data Table

	Quarter
	1	2	3	4
Surfboards manufactured and sold	500	400	100	250

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More Info

It takes

22

direct manufacturing

labor-hourshours

to make each board. The actual direct material cost is

$ 65.00$65.00

per board. The actual direct manufacturing labor rate is

$ 20$20

per hour. The budgeted variable manufacturing overhead rate is

$ 16$16

per direct manufacturing labor-hour. Budgeted fixed manufacturing overhead costs are

$ 20 comma 000$20,000

each quarter.

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