Question

LO Jacarda 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, labour, and overhead) by the quarter's production in units. The company's estimated costs, by quarter for the coming year are given below: Quarter Direct materials Direct labour Manufacturing overhead Total manufacturing costs Number of units to be produced Estimated unit product cost First Second Third Fourth 501,600 $250,300 $125,400 $376,200 250, 800 125,400 62,700 188, 100 347, 700 302,100 279, 300 324,900 $1,100,100 $678,300 $467,400 $889, 200 114,000 57,000 28,500 85,500 9.65 $ 11.90 $ 16.40 $ 10.40 Management finds the variation in unit product costs to be 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. Required: 1. Calculate the predetermined overhead rate based on units and direct labour? (Round your "per unit" answer to 2 decimal places.) per unit Predetermined overhead rate-unit of product Predetermined overhead rate-basis on direct labour cost

Answer 1

ANSWER

Solution 1:

Total estimated overhead = $347,700+ $302,100+ $279,300+ $324,900= $1,254,000

Estimated production for the year = 114,000+ 57,000+ 28,500+ 85,500= 285,000 units

Estimated direct labor cost for the year = $250,800+ $125,400+ $62,700+ $188,100= $627,000

Predetermined overhead rate - unit of product = Estimated overhead / Estimated production

= $1,254,000/ 285,000 = $4.40 per unit

Predetermined overhead rate - basis on direct labor cost = $1,254,000/ $627,000= 200%

Solution 2:

Computation of unit product cost
Particulars	Quarter
	First	Second	Third	Fourth
Direct materials	$501,600	$250,800	$125,400	$375,200
Direct labor	$250,800	$125,400	$62,700	$188,100
Manufacturing overhead applied	$501,600	$250,800	$125,400	$375,200
Total manufacturing cost	$1,254,000	$627,000	$313,500	$938,500
Nos of units to be produced	114,000	57,000	28,500	85,500
Unit Product cost	$11.00	$11.00	$11.00	$11.00

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************

Answer 2

How did you do the second part of the question?