Time period used to compute indirect cost rates. Capitola Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company’s production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers, Pacific Wholesale, due to large fluctuations in price. The owner of Capitola has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year: It takes 2 direct manufacturing labor-hours to make each board. The actual direct material cost is $65.00 per board. The actual direct manufacturing labor rate is $20 per hour. The budgeted variable manufacturing overhead rate is $16 per direct manufacturing labor-hour. Budgeted fixed manufacturing overhead costs are $20,000 each quarter. 1. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter. Required 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on an annual budgeted manufacturing overhead rate. 3. Capitola Manufacturing prices its surfboards at manufacturing cost plus 20%. Why might Pacific Wholesale be seeing large fluctuations in the prices of boards? Which of the methods described in requirements 1 and 2 would you recommend Capitola use? Explain.
Time period used to compute indirect cost rates. Capitola Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company’s production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers, Pacific Wholesale, due to large fluctuations in price. The owner of Capitola has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year: It takes 2 direct manufacturing labor-hours to make each board. The actual direct material cost is $65.00 per board. The actual direct manufacturing labor rate is $20 per hour. The budgeted variable manufacturing overhead rate is $16 per direct manufacturing labor-hour. Budgeted fixed manufacturing overhead costs are $20,000 each quarter. 1. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter. Required 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on an annual budgeted manufacturing overhead rate. 3. Capitola Manufacturing prices its surfboards at manufacturing cost plus 20%. Why might Pacific Wholesale be seeing large fluctuations in the prices of boards? Which of the methods described in requirements 1 and 2 would you recommend Capitola use? Explain.
Solution Summary: The author explains that job costing is a process of recording the cost on the basis of manufacturing job instead of the process.
Time period used to compute indirect cost rates. Capitola Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company’s production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers, Pacific Wholesale, due to large fluctuations in price. The owner of Capitola has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year:
It takes 2 direct manufacturing labor-hours to make each board. The actual direct material cost is $65.00 per board. The actual direct manufacturing labor rate is $20 per hour. The budgeted variable manufacturing overhead rate is $16 per direct manufacturing labor-hour. Budgeted fixed manufacturing overhead costs are $20,000 each quarter.
1. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter.
Required
2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on an annual budgeted manufacturing overhead rate.
3. Capitola Manufacturing prices its surfboards at manufacturing cost plus 20%. Why might Pacific Wholesale be seeing large fluctuations in the prices of boards? Which of the methods described in requirements 1 and 2 would you recommend Capitola use? Explain.
Definition Definition Total cost of procuring or producing a product or the cost that an individual or business owner undertakes for the manufacturing of goods.
Bowie Sporting Goods manufactures sleeping bags. The manufacturing
standards per sleeping bag, based on 5,000 sleeping bags per month,
are as follows:
Direct material of 4 yards at $5 per yard
Direct labor of 2 hours at $20 per hour
Overhead applied per sleeping bag at $18 In the month of April, the
company actually produced 4,900 sleeping bags using 24,300 yards of
material at a cost of $6.10 per yard. The labor used was 11,500 hours at
an average rate of $18.50 per hour. The actual overhead spending was
$96,200.
Determine the materials price variance.
Provide correct answer general Accounting question
Chapter 4 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
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