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we can't open this fde. xYaMeresoft Oice Horme xv.1 CaSecure https/ Can't open pes [Sel edi p Mai Connect Chapter 2 and 28 5 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 variations in demand. The company uses a 10 points 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 FirstSecond Thiedlli fourth $280,000 %140,000 $ 70,000 $210,000 ,80 4,0 29,00068,8 Direct materials Direct labor Manufacturing overhead Total anufacturing costs (a) Number of units to be produced (b) Estinated unit product cost () (b) 4.92 $43$ 9.47 References Management finds the variation in quarterly unit product costs to be confusing and difficult to work with It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accor been asked to find dingly, you have 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 fxed Assuming the estimated variable manufacturing overhead cost per unit is 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the for the fourth quarter? 3. What is causing the estimated unt product cost to fluctuate from one quarter to the next? 4 Assuming the company computes one predetermined overhead rate for the year rather calculate the unit product cost for all units produced during the year Complete this question by entering your answers in the tabs below

Explanation / Answer

1. Calculation of extimated Total Fixed manufacturing overhead cost per quarter - First Second Third Fourth Direct materials variable $280,000 $140,000 $70,000 $210,000 Direct labor variable $80,000 $40,000 $20,000 $60,000 Manufacturing Overhead** variable $48,000 $24,000 $12,000 $36,000 Fixed $182,000 $182,000 $182,000 $182,000 Total Cost $590,000 $386,000 $284,000 $488,000 Output ( in Unit)          120,000           60,000           30,000           90,000 Total Cost per unit $4.92 $6.43 $9.47 $5.42 ** Manufacturing variable overhead = 0.40* Output units Manufacturing fixed cost = Total manufacturing cost - manufacturing variable overhead 2. Given in above calculation Estimated unit product cost for the fourth quarter = $ 5.42 3. Produced/Output units causing the estimated unit product cost to fluctuate from one quarter to the next. 4. Overhead rate = Total overhead during the year / Total estimated produced units = (230000+206000+194000+218000)/(120000+60000+30000+90000)= $2.83 Total per unit cost = per unit material cost + per unit labor cost + per unit manufacturing cost = 2.33 + 0.67+ 2.83=$5.83

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