Kingsport Containers Company makes a single product with 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: Direct materials. Direct labor Manufacturing overhead Total manufacturing costs (a) Number of units to be produced (b) Estimated unit product cost (a) ÷ (b) First $ 240,000 80,000 230,000 $ 550,000 80,000 $ 6.88 Quarter Second $ 120,000 40,000 206,000 $366,000 40,000 $9.15 Third $ 60,000 20,000 194,000 $ 274,000 20,000 $13.70 Fourth $ 180,000 60,000 ? $ ? 60,000 $? Management finds the variation in quarterly unit product costs to be confusing. Accordingly, you have been asked to find a more appropriate way of applying manufacturing overhead cost to units of product. Required: 1. Assuming the estimated variable manufacturing overhead cost per unit is $0.60, 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.

Academy allocates support dept costs to production departments befoe establishing predetermined overhead rates for use in product costing.  Assembly uses machine hours as a base and expects to use 90,000 MH this year. Testing uses direct labor hours and expects to use 160,000 DLH this year.  Academy allocates support dept. costs to Assembly and Testing before their pre-determined rate. Support costs are allocated to productive depts. based on time of service while IT costs are allocated based on IT hours.  Dept EngSupport IT Assembly Testing Total Dept Overhead  $       2,000,000  $       1,000,000  $       3,000,000  $       2,000,000  $       8,000,000 Time of Service                        40                        50                      700                      450                  1,240 IT Hours                  1,000                  2,000                  9,000                11,000                23,000   A. Complete a cost allocation table using the step method.…

Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $25 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costs: Variable Fixed Based on absorption costing Finished-goods inventory Retained earnings Year 1 2,600 3,100 $15,500 18,600 Based on variable costing Finished-goods inventory Retained earnings LEHIGHTON CHALK COMPANY Selected Balance Sheet Information End of Year 1 10,400 9,400 $ 5,500 11,100 Selected information…

Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic Advanced Total Number of units produced and sold 20,000 10,000 30,000 $ 5,000,000 3,650,000 1,350,000 1,200,000 $3,000,000 $2,000,000 1,350,000 650,000 480,000 Sales Cost of goods sold Gross margin Selling and administrative expenses 2,300,000 700,000 720,000 (20,000) Net operating income (loss) $4 $4 170,000 150,000 Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental…