California State University, Sacramento Operations And Supply Chain Management Assignment Help - Kingsport Containers

Question - Kingsport Containers, Ltd, of the Bahamas experiences wide variation in demand for the 200-liter
steel drums it fabricates. The leakproof, rustproof steel drums have a variety of uses from storing
liquids and bulk materials to serving as makeshift musical instruments. The drums are made to order
and are painted according to the customer’s specifications—often in bright patterns and designs. The
company is well known for the artwork that appears on its drums. Unit product costs are computed on
a quarterly basis by dividing each quarter’s manufacturing costs (materials, labor, and overhead) by
the quarter’s production in units. The company’s estimated costs, by quarter, for the coming year
follow:

...Read More
Management finds the variation in unit costs confusing and difficult to work with. It has been
suggested that the problem lies with manufacturing overhead because it is the largest element of
cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing
overhead cost to units of product. After some analysis, you have determined that the company’s
overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of
production.
Required:
I. The company uses a job-order costing system. How would you recommend that manufacturing
overhead cost be assigned to production? Be specific, and show computations.
2. Re-compute the company’s unit product costs in accordance with your recommendations in
(1)above. ...Read Less

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