and 2B Help Save & Exit Submit Check my work Exercise 2-11 Varying Plantwide Pre

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and 2B Help Save & Exit Submit Check my work Exercise 2-11 Varying Plantwide Predetermined Overhead Rates (L02-1, LO2-2, LO2-3) 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 plantwide 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: First l SecondThirdlF Direct materials $280,000 $140,000 70,000 $210,000 Direct labor 80,000 40,000 20,000 60,000 230,000 206,000 194,000 Manufacturing overhead Total manufacturing costs (a) $590,000 $386,000 $284, 000S Number of units to be produced (b) 120,00060,00030,000 90,000 Estimated unit product cost (a)(b)4.92 6.43 9.47s Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has beern 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. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated Prev5 of 7lNext >

Explanation / Answer

1)Fixed manufacturing overhead included in total manufacturing overhead = Total overhead - variable overhead

                       230000 - [120000*.40]

                       230000 - 48000

                        182000

Overhead cost for quarter = [90000*.40]+182000

                  = 36000+ 182000

                 = 218000

Part4 )

Direct material 280000+140000+70000+210000 700000 Direct labor 80000+40000+20000+60000 200000 Manufacturing overhead 230000+206000+194000+218000 848000 Total manufacturing cost 1748000 Number of units 120000+60000+30000+90000 300000 Unit cost 1748000/300000 $ 5.83

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