Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 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 $ 280,000 $ 140,000 $ 70,000 $ 210,000

Direct labor 160,000 80,000 40,000 120,000

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 and difficult to work with. 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-a. Using the high-low method, estimate the fixed manufacturing overhead cost per quarter and the variable manufacturing overhead cost per unit. (Round the "Variable manufacturing overhead per unit" to 2 decimal places.)

1-b. Compute the total manufacturing cost and unit product cost for the fourth quarter. (Round the "Unit product cost" to 2 decimal places.)

3. Estimate the total manufacturing overhead cost for the year and an annual predetermined overhead rate. (Round the "Predetermined overhead rate" to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

World Class Internal Audit Tales From My Journey

Authors: Norman Marks

1st Edition

1500791962, 978-1500791964

More Books

Students also viewed these Accounting questions

Question

Compare the different types of employee separation actions.

Answered: 1 week ago

Question

Assess alternative dispute resolution methods.

Answered: 1 week ago

Question

Distinguish between intrinsic and extrinsic rewards.

Answered: 1 week ago