Jacarda Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed or a quarterly basis by dividing each quarter's manufacturing costs (materials, labour, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Direct materials Direct labour Manufacturing overhead Total manufacturing costs Number of units to be produced Estimated unit product cost Management finds the variation in unit product costs to be confusing and difficult to work with. It has been suggested that the probler lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company's overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production. Predetermined overhead rate-unit of product Predetermined overhead rate-basis on direct labour cost Required: 1. Calculate the predetermined overhead rate based on units and direct labour? (Round your "per unit" answer to 2 decimal places.) Estimated unit product cost First First Second Third Fourth $300,000 $150,000 $75,000 $225,000 150,000 75,000 37,500 112,500 210,000 180,000 165,000 195,000 $660,000 $405,000 $277,500 $532,500 100,000 50,000 25,000 75,000 $ 6.60 $ 8.10 $ 11.10 $ 7.10 2. Recompute the company's unit product costs in accordance with rate per unit in (1) above. (Round your answers to 2 decimal places.) $ 10.50 Quarter Quarter Second per unit 200 % Third Fourth
Jacarda Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed or a quarterly basis by dividing each quarter's manufacturing costs (materials, labour, and overhead) by the quarter's production in units. The company's estimated costs, by quarter, for the coming year are given below: Direct materials Direct labour Manufacturing overhead Total manufacturing costs Number of units to be produced Estimated unit product cost Management finds the variation in unit product costs to be confusing and difficult to work with. It has been suggested that the probler lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company's overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production. Predetermined overhead rate-unit of product Predetermined overhead rate-basis on direct labour cost Required: 1. Calculate the predetermined overhead rate based on units and direct labour? (Round your "per unit" answer to 2 decimal places.) Estimated unit product cost First First Second Third Fourth $300,000 $150,000 $75,000 $225,000 150,000 75,000 37,500 112,500 210,000 180,000 165,000 195,000 $660,000 $405,000 $277,500 $532,500 100,000 50,000 25,000 75,000 $ 6.60 $ 8.10 $ 11.10 $ 7.10 2. Recompute the company's unit product costs in accordance with rate per unit in (1) above. (Round your answers to 2 decimal places.) $ 10.50 Quarter Quarter Second per unit 200 % Third Fourth
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-6
Transcribed Image Text:Jacarda Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed on
a quarterly basis by dividing each quarter's manufacturing costs (materials, labour, and overhead) by the quarter's production in units.
The company's estimated costs, by quarter, for the coming year are given below:
Direct materials
Direct labour
Manufacturing overhead
Total manufacturing costs
Number of units to be produced
Estimated unit product cost
Management finds the variation in unit product 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 appropriate
way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company's
overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production.
Predetermined overhead rate-unit of product
Predetermined overhead rate-basis on direct labo cost
Required:
1. Calculate the predetermined overhead rate based on units and direct labour? (Round your "per unit" answer to 2 decimal places.)
Estimated unit product cost
$
2. Recompute the company's unit product costs in accordance with rate per unit in (1) above. (Round your answers to 2 decimal
places.)
First
Third
First Second
$300,000 $150,000 $75,000
Fourth
$225,000
150,000
75,000 37,500
112,500
210,000 180,000 165,000
195,000
$660,000 $405,000 $277,500 $532,500
100,000 50,000 25,000 75,000
6.60 $ 8.10 $ 11.10 $ 7.10
10.50
Quarter
Quarter
Second
per unit
20 %
Third
Fourth
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