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Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit costs are computed on a quarterly basis by dividing each quarter's manufacturing costs (materials, labor, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Quarter Second Third Fourth P180,000 72,000 216,000 P468,000 First Direct materials Direct labor.. P240,000 96,000 228.000 P564,000 P120,000 48,000 204.000 P372.000 P 60,000 24,000 192.000 P276,000 Manufacturing overhead. Total manufacturing costs. Number of units to be produced Estimated cost per unit 80,000 P7.05 40,000 P9.30 20,000 P13.80 60,000 P7.80 Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more suitable way of assigning manufacturing overhead cost to un ts of product. After some analysis, you have determined changes in the le el of production. Required: 1. The company uses a job-order costing system. recommend that manufacturing overhead cost be assigned to production? Be specific, and show computations. 2. Recompute the company's unit costs in accordance with your recommendations in (1) above. How would you

Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit costs are computed on a quarterly basis by dividing each quarter's manufacturing costs (materials, labor, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Quarter Second Third Fourth P180,000 72,000 216,000 P468,000 First Direct materials Direct labor.. P240,000 96,000 228.000 P564,000 P120,000 48,000 204.000 P372.000 P 60,000 24,000 192.000 P276,000 Manufacturing overhead. Total manufacturing costs. Number of units to be produced Estimated cost per unit 80,000 P7.05 40,000 P9.30 20,000 P13.80 60,000 P7.80 Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more suitable way of assigning manufacturing overhead cost to un ts of product. After some analysis, you have determined changes in the le el of production. Required: 1. The company uses a job-order costing system. recommend that manufacturing overhead cost be assigned to production? Be specific, and show computations. 2. Recompute the company's unit costs in accordance with your recommendations in (1) above. How would you

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...
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Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit costs are computed on a quarterly basis by dividing each quarter's manufacturing costs (materials, labor, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Quarter First Second Third Fourth Direct materials Direct labor. .. Manufacturing overhead. . Total manufacturing costs.... P240,000 P120,000 96,000 228.000 P564,000 48,000 204.000 P372.000 P 60,000 24,000 192,000 P276,000 P180,000 72,000 216.000 P468,000 Number of units to be produced. . Estimated cost per unit ... 80,000 P7.05 40,000 P9.30 20,000 P13.80 60,000 P7.80 Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more suitable way of assigning manufacturing overhead cost to un ts of product. After some analysis, you have determined changes in the le el of production. Required: 1. The company uses a job-order costing system. How would you recommend that manufacturing overhead cost be assigned to production? Be specific, and show computations. 2. Recompute the company's unit costs in accordance with your recommendations in (1) above.
Transcribed Image Text:Problem 2 Java Company manufactures a product that is subject to wide seasonal variations in demand. Unit costs are computed on a quarterly basis by dividing each quarter's manufacturing costs (materials, labor, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Quarter First Second Third Fourth Direct materials Direct labor. .. Manufacturing overhead. . Total manufacturing costs.... P240,000 P120,000 96,000 228.000 P564,000 48,000 204.000 P372.000 P 60,000 24,000 192,000 P276,000 P180,000 72,000 216.000 P468,000 Number of units to be produced. . Estimated cost per unit ... 80,000 P7.05 40,000 P9.30 20,000 P13.80 60,000 P7.80 Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more suitable way of assigning manufacturing overhead cost to un ts of product. After some analysis, you have determined changes in the le el of production. Required: 1. The company uses a job-order costing system. How would you recommend that manufacturing overhead cost be assigned to production? Be specific, and show computations. 2. Recompute the company's unit costs in accordance with your recommendations in (1) above.
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