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: Quarter Third $160,000 $ 80,000 $ 40,000 $120,000 First Second Fourth Đirect materials Direct labor 40,000 216,000 20,000 204,000 60,000 80,000 240,000 $480,000 $336,000 $264,000 $ Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) (b) 90,000 120,000 4.00 $ 60,000 5.60 $ 30,000 8.80 $ 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. 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 unit product cost 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.
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: Quarter Third $160,000 $ 80,000 $ 40,000 $120,000 First Second Fourth Đirect materials Direct labor 40,000 216,000 20,000 204,000 60,000 80,000 240,000 $480,000 $336,000 $264,000 $ Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) (b) 90,000 120,000 4.00 $ 60,000 5.60 $ 30,000 8.80 $ 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. 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 unit product cost 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.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 2E: Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each...
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I just need part 4 answered. Thank you!
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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:
Quarter
Third
Second
$160,000 $ 80,000 $ 40,000 $120,000
40,000
216,000
$480,000 $336,000 $264,000 S
First
Fourth
Direct materials
Direct labor
Manufacturing overhead
Total manufacturing costs (a)
Number of units to be produced (b)
Estimated unit product cost (a) ÷ (b)
20,000
204,000
80,000
60,000
240,000
60,000
5.60 $
90,000
120,000
4.00 $
30,000
8.80 S
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. 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 unit product cost
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 4
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Transcribed Image Text:au vcLauSE Il 15 UIIC I0IycL CICIIICIIL UI LULOI manuiaLIUNng CoUSI, ACCOIuInyiy, yoU Tiav
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 unit product c
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 rate
calculate the unit product cost for all units produced during the year.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 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. (Do not round the intermediate calculations and
round the "Unit product cost" to 2 decimal places.)
Unit product cost
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