Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 2, Problem 11E
Varying Plantwide Predetermined
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-ordercosting system and computes pIantwide predeterminedoverhead rates on a quarterly basis using the number of units to be produced as theallocation base. Its estimated costs, by quarter, for the coming year are given below:
Management finds the variation in quarterly unit product costs to be confusing and difficult to work with.It has been suggested that theproblem lies with manufacturing overhead because it is the largest element of total
Required:
1. Assuming the estimated variable manufacturing overhead cost per unit is $2.00, 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 thefourth quarter?
3. 1iat is causing the estimated unit product cost to fluctuate from one quarter to the next?
4. How would you recommend stabilizing the company’s unit product cost? Support your answer with computations.
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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:
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 $2.00, 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…
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
$ 320,000
120,000
240,000
$ 680,000
160,000
$ 4.25
Quarter
Second
$ 160,000
60,000
216,000
$ 436,000
80,000
$ 5.45
Third
$ 80,000
30,000
204,000
$ 314,000
40,000
$ 7.85
Fourth
$ 240,000
90,000
?
$ ?
120,000
$ ?
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…
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…
Chapter 2 Solutions
Introduction To Managerial Accounting
Ch. 2 - What is job-order costing?Ch. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...
Ch. 2 - Prob. 11QCh. 2 - What is underapplied overhead? Overapplied...Ch. 2 - What is a plantwide overhead rate? Why are...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Sweeten Company bad no jobs in progress at the...Ch. 2 - Harris Fabrics computes its plantwide...Ch. 2 - Luthan Company uses a plant wide predetermined...Ch. 2 - Computing Total Job Costs and Unit Product Costs...Ch. 2 - Computing Total Job Costs and Unit Product Costs...Ch. 2 - Braverman Company has two manufacturing...Ch. 2 - Job-Order Costing for a Service Company Tech...Ch. 2 - Prob. 7ECh. 2 - Newhard Company assigns overhead cost to jobs on...Ch. 2 - Taveras Corporation is currently operating at 50%...Ch. 2 - Prob. 10ECh. 2 - Varying Plantwide Predetermined Overhead Rates...Ch. 2 - Computing Predetermined Overhead Rates and Job...Ch. 2 - Departmental Predetermined Overhead Rates White...Ch. 2 - Prob. 14ECh. 2 - Plantwide and Departmental Predetermined Overhead...Ch. 2 - Plantwide Predetermined Overhead Rates; Pricing...Ch. 2 - Plantwide and Departmental Predetermined Overhead...Ch. 2 - Job-Order Costing for a Service Company Speedy...Ch. 2 - Multiple Predetermined Overhead Rates; Applying...Ch. 2 - Plantwide versus Multiple Predetermined Overhead...Ch. 2 - Plantwide versus Multiple Predetermined Overhead...
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