MusicMones/Garme a Golf Courses Golf Courses School Watch How I Met Y School Wat
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MusicMones/Garme a Golf Courses Golf Courses School Watch How I Met Y School Watch How I Met Ye ! GamerSaloon l Vide. Exercise 2-11 Varying Plantwide Predetermined Overhead Rates (L021, LO2-2. LO2-3 Kingsport Containers Company makes a single product that is subject to wide seasonal vanations in demand The company uses a and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be as the allocation base. Its estimated costs, by quartec, for the coming year are given below Direct materials Direct labor Nanufacturing overhead Total manufacturing costs (a) wumber of units to be produced (b) Estimated unit product cost (a)(b) $200,9e $180,09$58,e $15e,ee 22e,00e 196 84,000 160,000 8,0 4, 120,90 3.63% 4.70% 6.85 Management finds the vanation in quartery unt product coss to be confusing and difficult to work with it has been suggested that the problem ltes with manufacturing overhead because i been asked to find a more appropriate way of assigning manufacturing overhead cost to units Required: t Assuming the estmated variable manufacturing overhead cost per unit is s0.30, what must be manufacturing overhead cost per quater? t is the largest element of total manufacturing cost Accordingly you have of product the estmated total fixed 2 Assuming the assumptions obout cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. Wnat is causing the estimated unit product cost to fuctuate from one quarter to the Assuming the compay compuses one predetermined overhead rate for the year rather than computing quarterly overhead rates celculate the unit product cost for ell unvts produced during the year Complete this question by entering your answers in the tabs below stimated variable manufacturing overhead cost per unit is so.30, what must be the estimated total fixed manufacturing overhead cost per quarter? Required 2 Prey5 of E ype here to searchExplanation / Answer
Answer:
1
Manufacturing overhead cost is total of fixed cost + Variable Manufacturing Overhead Cost
Variable Manufacturing Overhead Cost per unit = $0.30 per unit (given)
Now we have to find the fixed manufacturing overhead cost as under
we find the fixed manufacturing overhead cost of quarter 1
Total Units to be produced = 160,000 Units
Total Variable Manufacturing Overhead Cost for 160,000 Units
= 160,000 Units x $0.30
= $48,000
Total Manufacturing Overhead cost of Quarter 1 = $220,000
220,000 = VMOH+FMOH
220,000 = 48,000 + FMOH
Fixed Manufacturing Overheads = 220,000 – 48,000 = 172,000
Fixed Manufacturing Overheads $ 172,000
______________________________________________
(2)
we find the fixed manufacturing overhead cost of quarter 4
Total Units to be produced = 160,000 Units
Total Variable Manufacturing Overhead Cost for 160,000 Units
= 120,000 Units x $0.30
= $36,000
Total Manufacturing overhead cost for quarter 4 is
=total of fixed cost + Variable Manufacturing Overhead Cost
=172,000+36000
=$208,000
Quarter
First
Second
Third
Fourth
Direct materials
120000
100000
50000
150000
Direct labor
160000
80000
40000
120000
Manufacturing overhead
220000
196000
184000
208000
Total manufacturing costs (a)
500000
376000
274000
478000
Number of units to be produced (b)
160000
80000
40000
120,000
Estimated unit product cost (a) ÷ (b)
3.125
4.7
6.85
3.98
Estimated unit product cost for quarter 4 =$3.98
___________________________________________
(3)
The fixed portion of the MOH cost is causing the unit product costs to fluctuate.
The unit product cost increases as the level of production decreases because fixed overhead is being spread over fewer units.
__________________________________________
(4)
Fixed cost for the year can be estimated as 4 times the quarterly value of $172,000 or $688,000.
he variable portion would still be $.30 per unit produced.
Therefore the cost formula would be: $688,000 + $.30(units produced)
Since the yearly production is expected to be 400,000 the estimated MOH cost is expected cost is =$688,000 + ($.30 X 400,000)
=688000+120,000
=$808,000
Thus, the stable yearly predetermined overhead would be
=$808,000/400,000
= $2.02 per unit produced.
Quarter
First
Second
Third
Fourth
Direct materials
120000
100000
50000
150000
Direct labor
160000
80000
40000
120000
Manufacturing overhead (2.02x unit produced)
323200
161600
80800
242400
Total manufacturing costs (a)
603200
341600
170800
512400
Number of units to be produced (b)
160000
80000
40000
120000
Estimated unit product cost (a) ÷ (b)
3.77
4.27
4.27
4.27
Quarter
First
Second
Third
Fourth
Direct materials
120000
100000
50000
150000
Direct labor
160000
80000
40000
120000
Manufacturing overhead
220000
196000
184000
208000
Total manufacturing costs (a)
500000
376000
274000
478000
Number of units to be produced (b)
160000
80000
40000
120,000
Estimated unit product cost (a) ÷ (b)
3.125
4.7
6.85
3.98
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