Finch Manufacturing estimated its product costs and volume of production for Year 3 by quarter as follows.
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Question:
Finch Manufacturing estimated its product costs and volume of production for Year by quarter as follows.
First Quarter Second Quarter Third Quarter Fourth Quarter
Direct raw materials $ $ $ $
Direct labor
Manufacturing overhead
Total production costs $ $ $ $
Expected units produced
Finch Company sells a souvenir item at various resorts across the country. Its management uses the products 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 costplus pricing strategy. The company finds variations in shortterm unit cost confusing to use. Unit cost variations complicate pricing decisions and many other decisions for which cost is a consideration.
Required
a Based on estimated total production cost, determine the expected quarterly cost per unit for Finchs product.
b Calculate the predetermined overhead rate.
b Calculate the unit cost per quarter based on the predetermined overhead rate.
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