Question

Problem 1

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
	First			Second			Third			Fourth
Direct materials	$	200,000		$	100,000		$	50,000		$	150,000
Direct labor		80,000			40,000			20,000			60,000
Manufacturing overhead		230,000			206,000			194,000			?
Total manufacturing costs (a)	$	510,000		$	346,000		$	264,000		$	?
Number of units to be produced (b)		160,000			80,000			40,000			120,000
Estimated unit product cost (a) ÷ (b)	$	3.19		$	4.33		$	6.60		$	?

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 $0.30, 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.

Problem 2

Plantwide and Departmental Predetermined Overhead Rates; Overhead Application [LO2-1, LO2-2]

Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs to be fixed costs. The first set of data that is shown below is based on estimates from the beginning of the year. The second set of data relates to one particular job completed during the year--Job Bravo.

Estimated Data	Assembly		Fabrication		Total
Manufacturing overhead costs	$	1,920,000	$	2,240,000	$	4,160,000
Direct labor-hours		80,000		48,000		128,000
Machine-hours		32,000		160,000		192,000

Job Bravo	Assembly	Fabrication	Total
Direct labor-hours	17	9	26
Machine-hours	9	12	21

Required:

1. If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to Job Bravo?

2. If Wilmington uses departmental predetermined overhead rates with direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication, how much manufacturing overhead would be applied to Job Bravo?

(Round your intermediate calculation to 2 decimal places.)

Answer 1

Solution 1-1:

Estimated total fixed manufacturing overhead cost per quarter = Total manufacturing overhead - Variable manufacturing overhead

= $230,000 - (160000*$0.30) = $182,000

Solution 1-2:

Estimated unit product cost for 4th quarter = Total Product Cost / Nos of units produced

= ($150,000 + $60,000 + 120000*$0.30 + $182,000) / 120000 = $3.57 per unit

Solution 1-3:

Fixed manufacturing overhead causing the estimated unit product cost to fluctuate from one quarter to the next

Solution 1-4:

Computation of unit product cost for all unit produced during the year = ($510,000 + $346,000 + $264,000 + $428,000) / (160000 + 80000 + 40000+ 120000)

= $3.87 per unit

Note: As multiple questions are posted, i have answered first question as per HomeworkLib policy, kindly post separate question for answer of remaining question.