Sampson Manufacturing estimated its product costs and volume of production for 2015 by quarter as follows.

Sampson Company sells a souvenir item at various resorts across the country. Its management uses the product’s estimated quarterly cost to determine the selling price of its product. The company expects a large variance in demand for the product between quarters due to its seasonal nature. The company does not expect overhead costs, which are predominately fixed, to vary significantly as to production volume or with amounts for previous years. Prices are established by using a cost-plus pricing strategy. The company finds variations in short-term unit cost confusing to use. Unit cost variations complicate pricing decisions and many other decisions for which cost is a consideration.

Round computations to two decimal points.
a. Based on estimated total production cost, determine the expected quarterly cost per unit for Sampson’s product.
b. How could overhead costs be estimated each quarter to solve the company’s unit cost problem? Calculate the unit cost per quarter based on yourrecommendation.

  • CreatedFebruary 07, 2014
  • Files Included
Post your question