Kingsport Containers, Ltd$,$ of the Bahamas experiences wide variation in demand for the $200-$

liter steel drums it fabricates. The leakproof, rustproof steel drums have a variety of uses from

storing liquids and bulk materials to serving as makeshift musical instruments. The drums are

made to order and are painted according to the customer's specifications$-$ often in bright patterns

and designs. The company is well known for the artwork that appears on its drums. Unit product

costs are computed on a quarterly basis by dividing each quarter's manufacturing costs

$($materials$,$ labor, and overhead$)$ by the quarter's production in units. The company's estimated

costs, by quarter, for the coming year follow:

Management Accounting

Management finds the various in unit costs to be confusing and difficult to work with. It has been

suggested that the problem lies with manufacturing overhead, since it 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:

How would you recommend that manufacturing overhead cost be assigned to production? Be

specific, and show computations.

Recompute the company's unit product costs in accordance with your recommendations in

$(1)$ above.

How to you the correlation formula in excel to find which allocation base to use to allocate fixed cost. Whether material cost or direct labour cost. Please show the calculation and step in excel.