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:
Part 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?
Part 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?
Part 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?