Kunkel Company makes two products and uses a conventional costing system in whic
ID: 2342104 • 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:
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 $960,000. Using the company's conventional costing system, compute the unit product costs for the two products.
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:
Compute the unit product costs for the two products using the proposed ABC system.
(For all requirements, do not round intermediate calculations. Round your final answers to 2 decimal places.)
Mercon Wurcon Direct materials cost per unit $ 10.00 $ 7.00 Direct labor cost per unit $ 10.00 $ 12.00 Direct labor-hours per unit 0.50 5.75 Number of units produced 2,000 4,000 Mercon Wurcon 40.00 $ 249.00 1. Unit product cost under conventional system 2. Unit product cost under ABC systemExplanation / Answer
Overhead rate = 960000/24000 = 40 per labour hour
1) Unit product cost under Conventional system
2) Unit product cost under ABC system
Mercon Wurcon Direct material 10 7 Direct labour 10 12 Overhead per unit 40*.50 = 20 40*5.75 = 230 Total unit product cost 40 249Related Questions
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