Chapter 2 Cutting Finishing Direct. Sweaten Company Had No Jobs b Check my work

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Chapter 2 Cutting Finishing Direct. Sweaten Company Had No Jobs b Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate con Exercise 2-11 Varying Plantwide Predetermined Overhead Rates [LO2-1, 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 Direct material Manut aeturarvg overhead Bunber ot unita to be produced (b) Estinated unit produet cost a)(b) $200.00 $10.0050,003150,000 .000 40,000 120,000 60,000 80, 240 000 216 000 204 900 5.00 6.60 $ .0 Management finds the variation in quarterly unit product costs to be confusing and difficuit to work with. it has been 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 1 Assuming the estimated variable manufacturing overhead cost per unit is S0.40, what must be the estimated total fixed 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost overhead cost per quarter? for the fourth quarter? 3 What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4 Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates calculate the unit product cost for all units produced during the year O Answer is complete but net entirely correct. Complete this question by entering your answers in the tabs below 889 3

Explanation / Answer

Answer 1. Total Manufacturing Overhead - First Qtr.           240,000.00 Less: Variable MOH - $0.40 X 120,000 Units             48,000.00 Fixed Manufacturing Overhead per Qtr.           192,000.00 Answer 2. Fourth Qtr Direct Material           210,000.00 Direct Labor             90,000.00 Manufacturing Overhead           228,000.00 Total Manufacturing Costs           528,000.00 No. of Units Produced                   90,000 Estimated Unit Product Costs                        5.87 Manufacturing Overhead = $192,000 (Fixed MOH) + (90,000 Units X $0.40) (Variable MOH) Manufacturing Overhead = $228,000 Answer 3. Fixed manufacturing overhead is causing the unit product cost to fluctuate. The unit product cost increases when level of production decreases because fixed overhead is distributed over less units. Answer 4 Estimated Fixed Overhead - $192,000 X 4           768,000.00 Variable Overhead - 300,000 Units X $0.40           120,000.00 Total Overhead           888,000.00 Predetermined Overhead Rate = $888,000 (Total Overhead) / 300,000 Units Predetermined Overhead Rate = $2.96 per unit Quarter First Second Third Fourth Direct Materials           200,000.00     100,000.00        50,000.00     150,000.00 Direct Labor           160,000.00        80,000.00        40,000.00     120,000.00 Manufacturing Overhead           355,200.00     177,600.00        88,800.00     266,400.00 Total Manufacturing Overhead           715,200.00     357,600.00      178,800.00     536,400.00 No. of Units Produced                 120,000              60,000              30,000             90,000 Estimated Unit Product Cost                        5.96                  5.96                   5.96                  5.96

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