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Trend Analysis of the Unit Manufacturing Costs of Products to Analyze Costs

Question

GIVEN:  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?

Summary

This question belongs to accounting and discusses about trend analysis of the unit manufacturing costs of product for a manufacturing company in a particular month and thus analysing changes in costs.

Total word count: 290

 

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