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Sheridan Products Company uses a job-order cost system. For a number of months there has been an ongoing rift between the sales department and
Sheridan Products Company uses a job-order cost system. For a number of months there has been an ongoing rift between the sales department and the production department concerning a special-order product. TC-1. TC-1 is a seasonal product that is manufactured in batches of 2.360 units. It is sold at cost plus a markup of 30% The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution to the problem is for the sales department to increase sales in the slack periods. Carol Garcia, president of the company, asks you as the company accountant to collect quarterly data on TC-1 for the past year. From the cost accounting system, you accumulate the following production quantity and cost data: Quarter Costs 2 3 4 Direct materials $ 118,000. $ 259,600 $ 94,400 $ 236,000 Direct labour 70,800 155,760 56.640 141.600 Manufacturing overhead 123,900 180.540 114,460 147,500 Total $312.700 $ 595,900 $ 265,500 $ 525.100 Production in batches 5 11 4 10 Unit cost (per batch) $ 62.540 $ 54,173 $ 66,375 $ 52.510 From the cost accounting system, you accumulate the following production quantity and cost data: Quarter Costs 1 2 3 Direct materials $ 118,000 $ 259,600 $ 94,400 $ 236.000 Direct labour 70,800 155,760 56,640 141,600 Manufacturing overhead 123,900 180.540. 114,460 147,500 Total $ 312,700 $ 595,900 $ 265.500 $ 525.100 Production in batches 5 11 4 10 Unit cost (per batch) $ 62.540 $ 54,173 $ 66.375 $ 52.510 (c) Restate the quarterly data by applying overhead as a set rate per batch Costs Direct materials Direct labour Manufacturing overhead applied Total Production in batches Unit cost (per batch) Quarter
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