Kunkel Company makes two products and uses a conventional costing system in whic
ID: 2333390 • Letter: K
Question
Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:
Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced Mercon Wurcon $12.00 $ 9.00 $15.00 $ 17.00 3.25 2,0004,000 0.50 These products are customized to some degree for specific customers Required: 1. The company's manufacturing overhead costs for the year are expected to be $560,000. Using the company's conventional costing system, compute the unit product costs for the two products. (Do not round intermediate calculation. Round your final answers to 2 decimal places.) Mercon Wurcon Unit product cost 2. Management is considering an activity-based costing system in which half of the overhead would continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year: Mercon Wurcon Total Engineering design time (in hours) 2,000 2,000 4,000 Compute the unit product costs for the two products using the proposed ABC system. (Do not round intermediate calculation. Round your final answers to 2 decimal places.) MerconWurcon Unit product costExplanation / Answer
1)
Total direct labor hours = Labor hours required in Product Marcon + Labor hours required in Product Wurcon
= 2000*0.50 + 4000*3.25 = 1000 + 13000 = 14000 hours
Total manufacturing overhead cost = 560000
Manufacturing overhead cost per direct labor hour = 560000/14000 = 40
Calculation of unit product cost as per conventional costing system:
Mercon:
Direct Materials cost = 12
Direct labor cost = 15
Manufacturing overhead cost = 0.50*40 = 20
Unit product cost = 12+15+20 = 47
Wurcon:
Direct Materials cost = 9
Direct labor cost = 17
Manufacturing overhead cost = 3.25*40 = 130
Unit product cost = 9+17+130 = 156
2)
Total overhead cost = 560000
Half of overhead cost = 560000/2 = 280000
Total direct labor hours = 2000*0.50 + 4000*3.25 = 1000 + 13000 = 14000 hours
Allocation of overhead on the basis of direct labor hours = 280000/14000 = 20 per direct labor hour
Total Engineering design time = 4000 hours
Allocation of overhead on the basis of engineering design time = 280000/4000 = 70 per hour
Calculation of unit product cost as per ABC System:
Mercon:
Direct Materials cost = 12
Direct labor cost = 15
Manufacturing overhead cost = 0.50*20 + (2000/2000)*70 = 10 + 70 = 80
Unit product cost = 12+15+80 = 107
Wurcon:
Direct Materials cost = 9
Direct labor cost = 17
Manufacturing overhead cost = 3.25*20 + (2000/4000)*70 = 65 + 35 = 100
Unit product cost = 9+17+100 = 126
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.