The controller for Traditional Manufacturing Inc. performed a trend analysis of the unit manufacturing costs of product T-2 for the month of March. Two patterns emerged; there was a gradual upward trend in the unit costs over the month for T-2 and there was an upward spike in unit costs on Fridays which did not carry over to Mondays. (The plant was closed on weekends.)
REQUIRED:
1. What are some possible explanations for the gradual increase in unit manufacturing costs over the month? What information would you ask for to investigate the possible explanations?
2. What are some possible explanations for the Friday upward spike in unit manufacturing costs? What information would you ask for to investigate the possible explanations?
3. If manufacturing overhead is allocated using an annually predetermined overhead rate, how might a product have an increase in manufacturing overhead attached to it during a particular month or day?