Reference no: EM132585820

Uprise Inc. manufactures wireless speakers and traditional speakers in a common manufacturing facility. The company has become aware of unusual circumstances in the costs of its products which management cannot explain. It seems that the sales and related production of wireless speakers are in a very consistent growth market and are easily predicted. However, the sales and related production of traditional speakers are very erratic. Management does not understand why the costs per unit of wireless speakers change when the production level seldom changes.

Required:

Question a. After some investigation you determine that for the last two quarters, the common fixed cost of the manufacturing operation has been $800,000. For the first quarter 12,000 wireless and 13,000 traditional units were produced, respectively. For the second quarter, 12,000 wireless and 8,000 traditional units were produced, respectively. What were the total cost per product and the cost per unit of each product in each quarter when production units are the allocation basis?

Question b. After studying the results of the above calculations you decide to use the company's average quarterly production of 12,000 wireless and 10,500 traditional units as the allocation base, respectively. What are the total cost per product and the cost per unit per quarter for each product when average production is used?

Question c. Which allocation base do you recommend, and why?