Lake Manufacturing estimated its product costs and production volume for the upcoming year by quarter as follows:
The company expects a significant increase in volume in the fourth quarter due to holiday sales.The company does not expect overhead costs,which are predominately fixed,to vary with production volume or to vary significantly from previous years.Selling prices are established using a cost-plus pricing strategy where cost is the product's estimated quarterly cost.However,the company finds the wide variations in short-term unit cost difficult to use.Specifically,unit cost fluctuations complicate pricing decisions and many other decisions where cost is a consideration.
Required:
1)Compute the company's expected cost per unit for each quarter of the year.
2)How would you suggest that overhead costs be estimated to solve the company's unit cost problem? Calculate the unit cost per quarter based on your recommendation.

Question

Lake Manufacturing estimated its product costs and production volume for the upcoming year by quarter as follows:
  The company expects a significant increase in volume in the fourth quarter due to holiday sales.The company does not expect overhead costs,which are predominately fixed,to vary with production volume or to vary significantly from previous years.Selling prices are established using a cost-plus pricing strategy where cost is the product's estimated quarterly cost.However,the company finds the wide variations in short-term unit cost difficult to use.Specifically,unit cost fluctuations complicate pricing decisions and many other decisions where cost is a consideration.
Required:
1)Compute the company's expected cost per unit for each quarter of the year.
2)How would you suggest that overhead costs be estimated to solve the company's unit cost problem? Calculate the unit cost per quarter based on your recommendation.

Quizplus · Accepted Answer

The Answer of Lake Manufacturing estimated its product costs and production volume for the upcoming year by quarter as follows:
  The company expects a significant increase in volume in the fourth quarter due to holiday sales.The company does not expect overhead costs,which are predominately fixed,to vary with production volume or to vary significantly from previous years.Selling prices are established using a cost-plus pricing strategy where cost is the product's estimated quarterly cost.However,the company finds the wide variations in short-term unit cost difficult to use.Specifically,unit cost fluctuations complicate pricing decisions and many other decisions where cost is a consideration.
Required:
1)Compute the company's expected cost per unit for each quarter of the year.
2)How would you suggest that overhead costs be estimated to solve the company's unit cost problem? Calculate the unit cost per quarter based on your recommendation.

Lake Manufacturing Estimated Its Product Costs and Production Volume for the Upcoming