Plunge Manufacturing produces outdoor wading and slide pools. The company uses a normal-

costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-

hours. Most of the companys production and sales occur in the first and second quarters of the

year. The company is in danger of losing one of its larger customers, Socha Wholesale, due to

large fluctuations in price. The owner of Plunge has requested an analysis of the manufacturing

cost per unit in the second and third quarters. You have been provided the following budgeted

information for the coming year:

Quarter

________

1

2

3

4

_

Pools manufactured and sold

565

490

245

100

It takes 1 direct manufacturing labor-hour to make each pool. The actual direct material cost is

$14.00 per pool. The actual direct manufacturing labor rate is $20 per hour. The budgeted

variable manufacturing overhead rate is $15 per direct manufacturing labor-hour. Budgeted fixed

manufacturing overhead costs are $12,250 each quarter.

Required:

1.

Calculate the total manufacturing cost per unit for the second and third quarter assuming the

company allocates manufacturing overhead costs based on the budgeted manufacturing

overhead rate determined for each quarter.

2.

Calculate the total manufacturing cost per unit for the second and third quarter assuming the

company allocates manufacturing overhead costs based on an annual budgeted

manufacturing overhead rate.

3.

Plunge Manufacturing prices its pools at manufacturing cost plus 30%. Why might Socha

Wholesale be seeing large fluctuations in the prices of pools? Which of the methods

described in requirements 1 and 2 would you recommend Plunge use? Explain

**I need help with the last part, question 3. *****

I would say they need to choose annual since if they chose quarterly that could impact prices negativley.