Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Quarter Costs 1 2 3 4 Direct materials $95,000 $228,000 $76,000 $361,000 Direct labor 40,000 96,000 32,000 152,000 Manufacturing overhead 130,000 146,880 117,000 361,000 Total $265,000 $470,880 $225,000 $874,000 Production in batches 5 12 4 Unit cost (per batch) $53,000 $39,240 $56,250 19 $46,000 Costs Direct materials Direct labor Manufacturing overhead Applied Total Production in batches Unit cost (per batch) A SA +A 1 95000 40000 +A $ A +A 2 Quarter 3 228000 $ AA 96000 12 $ A +A $ 76000 32000 4 A d 1 +A +A 95000 40000 5 2 Quarter A A 228000 96000 12 +A $ 3 A 76000 32000 A 4 4 $ A +A 361000 152000 19