Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:
| | Quarter |
| First | Second | Third | Fourth |
| Direct materials | $ 320,000 | $ 160,000 | $ 80,000 | $ 240,000 |
| Direct labor | 120,000 | 60,000 | 30,000 | 90,000 |
| Manufacturing overhead | 230,000 | 206,000 | 194,000 | ? |
| Total manufacturing costs (a) | $ 670,000 | $ 426,000 | $ 304,000 | $ ? |
| Number of units to be produced (b) | 120,000 | 60,000 | 30,000 | 90,000 |
| Estimated unit product cost (a) (b) | $ 5.58 | $ 7.10 | $ 10.13 | $ ? |
Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product.
Required:
1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter?
2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter?
3. What is causing the estimated unit product cost to fluctuate from one quarter to the next?
4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year.
Kingsport Containers Company makes a single product that is subject to wide seasonal varlations in demand. The company uses a job-order costling system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by cuarter, for the coming year are glven below: Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly. you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated varlable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fuctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. Complete this question by entering your answers in the tabs below. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? Kingsport Containers Company makes a single product that is subject to wide seasonal varlations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by cuarter, for the coming year are glven below: Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overheod because it is the largest element of total monufacturing cost. Accordingly, you have been asked to find o more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated varlable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fuctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates. calculate the unit product cost for all units produced during the year. Complete this question by entering your answers in the tabs below. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? (Do not round intermediate calculations and round the "Unit product cost" to 2 decimal places.) Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies vith manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly. you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavlor from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. Complete this question by entering your answers in the talss below. What is causing the estimated unit product cost to fluctuate from one quarter to the next? Ihe fixed portion of the manufacturing overhead cost is causing the unt product costs to fluctuate. The unit product cost increases as the level of production decreseses because the flyed owerhead is spreed over tener uniss. The fixed portion of the manufacturirg overhead cost is causing the unit product costs to fluctuate. The unit product cost decreases as the lensl of broduction decreases because the fixed owemead is spread over fener units. The viriazde porlion of the marufacturing cverhead ccset is causing the unil producd ccels to fluctuate. The unil pratuct cost incresses as the level of broduelisn deerreases bemausa the variable prethestd is sppesisd over fener uriis. The verieble portion of the menufacturing owerhead cost is causing the unit product coets to fluctuate. The unit procuct cost decrecses as the lenel of production decreases because the variabie owernead is spreed over tener unirs. Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly. you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavlor from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. Complete this question by entering your answers in the tabs below. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. Note: Do not round intermediate calculations and round your final answer to 2 decimal places
