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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
I just need part 4 answered. Thank you!
Transcribed Image Text:Saved
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
2 of 8
Next >
AC
Graw
Hill
Prev
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
< Required 3
Prev
2 of 8
Next >
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education