Posts Tagged ‘manufacturing costs’
Javadi Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed on a quarterly basis by dividing each quarter’s manufacturing costs (materials, labor, and overhead) by the quarter’s production in units. The company’s estimated costs, by quarter, for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
219,000
$
132,000
$
51,000
$
195,000
Direct labor
87,600
52,800
20,400
78,000
Manufacturing overhead
300,000
220,000
180,000
260,000
Total manufacturing costs
$
606,600
$
404,800
$
251,400
$
533,000
Number of units to be produced
73,000
44,000
17,000
65,000
Estimated unit product cost
$
8.31
$
9.2
$
14.79
$
8.2
Management finds the variation in unit costs confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the company’s overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production.
Requirement 1:
The company uses a job-order costing system. How would the manufacturing over-head cost be assigned to production? (Round your answers to two decimal places. Omit the "%" and "$", which is provided for you.)
Overhead rate on units to be produced
$
per unit
Overhead rate on direct labor cost
%
Overhead rate on direct materials cost
%
Requirement 2:
Recompute the company’s unit product costs in accordance with one of your calculations in (1) above. (Round your answers to two decimal places. Omit the "$" sign in your response.)
Quarter
Unit product cost
First
$
Second
$
Third
$
Fourth
$
can some one plz explain how to do this i am trying to figure this out but my book does not explain how to solve this thank you
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