Rosen Manufacturing Company produced 500 units of inventory in J

Rosen Manufacturing Company produced 500 units of inventory in January 2011. The company expects to produce an additional 5,500 units of inventory during the remaining 11 months of the year, for total estimated production of 6,000 units in 2011. Direct materials and direct labor costs are $70 and $82 per unit, respectively. Rosen expects to incur the following manufacturing overhead costs during the 2011 accounting period: 

Indirect materials Depreciation on equipment Utilities cost Salaries of plant manager and staff Rental fee on manufactur


a. Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units.

b. Determine the estimated cost of the 500 units of product made in January.

c. Is the cost computed in Requirement α actual or estimated? Could Rosen improve accuracy by waiting until December to determine the cost of products? Identify two reasons that a manager would want to know the cost of products in January. Discuss the relationship between accuracy and relevance as it pertains to this problem. 


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