Question

Java Company makes a single product that is subject to wide seasonal variations in demand. The company uses a border costing system and compres prem of units to be produced as the allocation base is estimated costs by quarter for the coming year are given below edovad ona ya ng tenure Third Earth Decatoria Direct labor Manufacturing overhead Total manufacturing costs ) Number of und to be produced by Estimated un product cost- 72.000 000 4000 220.000 204000 55640005372.000 30000 40000 24000 192.000 275.000 20000 0 .000 Management finds the variation in quarterly unit product costs to be confusing and out to work with has been suggested that the problem lies with manufacturing overhead because it is the largest dement manufacturing cost. Accordingly, you have been asked to find a more appropriate way of siring manufacturing overhead cost to units of product Required: 1. Using the high-low method, samute the feed manufacturing overhead cost per e and the wate manufacturing overhead cont per unde r places) and the variable Fred manufactung overhead cost Variable manufacturing overhead 1.b. Compute the total manufacturing cost and unit product cost for the fourth quarter (Round the unit product cost to 2 decimal places. Tot manufacturing cost

Answer 1

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Javadi Company
Answer 1 a
High Low method
Variable cost=	(Highest activity cost- Lowest activity cost)/ (Highest activity units- Lowest activity units)
	Quarter	Manufacturing Overhead	Units produced
Highest activity	First	228,000.00	80,000.00
Lowest activity	Third	192,000.00	20,000.00
Difference		36,000.00	60,000.00
Variable cost per unit		0.60
Fixed cost	Highest activity cost- (Highest units * Variable cost per unit)
Fixed cost	228,000-(80000*0.60)
Fixed cost	180,000.00

Answer 1 b	Quarter 4
Number of units	60,000.00
Variable cost per time	0.60
Total Variable cost	36,000.00
Fixed cost	180,000.00
Total manufacturing overhead	216,000.00
Direct Materials	180,000.00
Direct Labor	72,000.00
Total manufacturing cost	468,000.00
Number of units	60,000.00
Unit product cost	7.80

Answer 3	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Total manufacturing overhead cost	228,000.00	204,000.00	192,000.00	216,000.00	840,000.00
Number of units	80,000.00	40,000.00	20,000.00	60,000.00	200,000.00
Predetermined overhead rate per unit					4.20