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Dura Drums Ltd$.($located in Jamaica$)$ experiences wide variation in demand for the $500-$litre 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 costs are computed on a quarterly basis by dividing each quarter$$s manufacturing costs $($materials$,$ labour and overhead$)$ by the quarter$$s production in units. The company$$s estimated costs, by quarter, for the coming year are as follows:

Quarter

First Second Third Fourth

Direct materials $ $130,000$ $ $260,000$ $ $65,000$ $ $195,000$

Direct labour $100,000200,00050,000150,000$

Manufacturing overhead $240,000320,000190,000290,000$

Total manufacturing costs $ $470,000$ $ $780,000$ $ $305,000$ $ $635,000$

Number of units to be produced $40,00080,00020,00060,000$

Estimated cost per unit $ $11\mathrm{.}75$ $ $9\mathrm{.}75$ $ $15\mathrm{.}25$ $ $10\mathrm{.}58$

Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since 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:

$1.$ What would be the predetermined manufacturing overhead rate for the year on the basis of total units to be produced? $($Round your answer to $2$ decimal places.$)$

$2.$ Recompute the company's unit costs in accordance with your recommendations in part $(1).($Round "Unit product cost" to $2$ decimal places.$)$Dura Drums Ltd$.($located in Jamaica$)$ experiences wide variation in demand for the $500-$litre 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 costs are computed on a quarterly basis by dividing each

quarter's manufacturing costs $($materials$,$ labour and overhead$)$ by the quarter's production in units. The company's estimated costs, by

quarter, for the coming year are as follows:

Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with

manufacturing overhead, since 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:

What would be the predetermined manufacturing overhead rate for the year on the basis of total units to be produced? $($Round your

answer to $2$ decimal places.$)$

Recompute the company's unit costs in accordance with your recommendations in part $(1).($Round "Unit product cost" to $2$ decimal

places.$)$

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