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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
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 quarter's manufacturing costs (materials, labour, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Direct materials Direct labour Manufacturing overhead Total manufacturing costs Number of units to be produced Estimated unit product cost Quarter First Second Third Fourth $300,000 $150,000 $ 75,000 $225,000 150,000 75,000 37,500 112,500 210,000 180,000 165,000 195,000 $660,000 $405,000 $277,500 $532,500 100,000 50,000 25,000 75,000 $ 6.60 $ 8.10 $ 11.10 $ 7.10 Management finds the variation in unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company's overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production. Required: 1. Calculate the predetermined overhead rate based on units and direct labour? (Round your "per unit" answer to 2 decimal places.) Predetermined overhead rate-unit of product Predetermined overhead rate-basis on direct labour cost per unit % 2. Recompute the company's unit product costs in accordance with rate per unit in (1) above. (Round your answers to 2 decimal places.) Quarter First Second Third Fourth Estimated unit product cost
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