Kingsport Containers Company makes a single product that is
subject to wide seasonal variations in demand....
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Accounting
Kingsport Containers Company makes a single product that issubject to wide seasonal variations in demand. The company uses ajob-order costing system and computes predetermined overhead rateson a quarterly basis using the number of units to be produced asthe allocation base. Its estimated costs, by quarter, for thecoming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
240,000
$
120,000
$
60,000
$
180,000
Direct labor
120,000
60,000
30,000
90,000
Manufacturing overhead
240,000
216,000
204,000
?
Total manufacturing costs (a)
$
600,000
$
396,000
$
294,000
$
?
Number of units to be produced (b)
160,000
80,000
40,000
120,000
Estimated unit product cost (a ÷ b)
$
3.75
$
4.95
$
7.35
$
?
Management finds the variation in quarterly unit product coststo be confusing and difficult to work with. It has been suggestedthat the problem lies with manufacturing overhead because it is thelargest element of total manufacturing cost. Accordingly, you havebeen asked to find a more appropriate way of assigningmanufacturing overhead cost to units of product.
Required:
1-a.
Using the high-low method, estimate the fixed manufacturingoverhead cost per quarter and the variable manufacturing overheadcost per unit. (Round the "Variable manufacturing overheadper unit" to 2 decimal places.)
1-b.
Compute the total manufacturing cost and unit product cost forthe fourth quarter. (Round the "Unit product cost" to 2decimal places.)
3.
Estimate the total manufacturing overhead cost for the year andan annual predetermined overhead rate. (Round the"Predetermined overhead rate" to 2 decimal places.)
Answer & Explanation
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Please give positive ratings so I can keep answering If you have any queries please comment Thanks I have marked the final answers in green color Kingsport Containers Company Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Number of units to be produced 16000000 8000000 4000000 12000000 A Direct Materials cost 24000000 12000000 6000000 18000000 B Direct Materials
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