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Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit costs are computed on a quarterly basis by
Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit 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 are given below: Quarter Second Third Fourth First P240,000 P120,000 P 60,000 P180,000 6,000 48,000 24,000 72,000 228,000 204.000 192,000 216,000 P564,000 P372.000 p276.000 2468,000 9 Manufacturing overhead.. Total manufacturing cost P7.05 P9.30 P13.80 P7.80 Estimated cost per unit Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing erhead, since it is the largest element of cost. Accordingly, you have been asked to find a more suitable way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined changes in the level of production. Required: 1. The company uses a job-order costing system. How would you recommend that manufacturing overhead cost be assigned to production? Be specific, and show computations. 2. Recompute the company's unit costs in accordance with your recommendations in (1) above
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