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(c) Restate the quarterly data by applying overhead as a set rate per batch.

(c) Restate the quarterly data by applying overhead as a set rate per batch.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(c) Restate the quarterly data by applying overhead as a set rate per batch. Costs Direct materials Direct labor Manufacturing overhead Applied Total Production in batches Unit cost (per batch) $ $ $ 1 $ $ Quarter LA $ $ 3
Transcribed Image Text:(c) Restate the quarterly data by applying overhead as a set rate per batch. Costs Direct materials Direct labor Manufacturing overhead Applied Total Production in batches Unit cost (per batch) $ $ $ 1 $ $ Quarter LA $ $ 3
Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 77,000 $126,000 $270,000 217,000 2 7 Quarter $60,000 165,000 $420,000 $575,160 140,160 15 $38,344 3 $108,000 66,000 210,000 $384,000 $64,000 4 $216,000 132,000 132.000 $480,000 12 $40,000
Transcribed Image Text:Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 77,000 $126,000 $270,000 217,000 2 7 Quarter $60,000 165,000 $420,000 $575,160 140,160 15 $38,344 3 $108,000 66,000 210,000 $384,000 $64,000 4 $216,000 132,000 132.000 $480,000 12 $40,000
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