Kunkel Company makes two products and uses a conventional costing system in whic

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:

The company's manufacturing overhead costs for the year are expected to be $720,000. 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.)

Unit product cost: Mercon Wurcon

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. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)

Unit Product Cost: Mercon Wurcon

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:

Explanation / Answer

Mercon Wurcon Total Direct material cost per unit 8 6 Direct labor cost per unit 13 16 Direct labor hours per unit 0.4 2.8 Number of units produced 4000 8000 12000 Total number of hours 1600 22400 24000 Estimated manufacturing overhead 720000 Predetermined overhead rate = Estimated manufacturing overhead / Total number of hours                                                                = 720000 / 24000                                                                = 30 1) Unit product cost - convential costing Mercon Wurcon Total Direct material cost per unit 8 6 Direct labor cost per unit 13 16 Direct labor hours per unit (A) 0.4 2.8 Predetermined overhead rate per hour (B) 30 30 Overhead applied ( A*B) 12 84 Unit product cost ( DM + DL + Overhead applied) 33 106 2) Predetermined overhead rate = Estimated manufacturing overhead / Total number of hours      ( labor hours 1/2*720000)      = 360000 / 24000 15                                                                = 15 Direct labor hours per unit (A) 0.4 2.8 Predetermined overhead rate per hour (B) 15 15 Overhead applied ( A*B) 6 42 predetermined overhead rate (ABC) Mercon Wurcon Total Engineering design time ( in hours) 2000 2000 4000 Estiimated overhead 360000 Predetermined overhead rate = Estimated overhead / Engineering time= 90 Overhead applied 180000 180000 360000 Number of units produced 4000 8000 Overhead applied per unit 45 22.5 Unit product cost - ABC Mercon Wurcon Total Direct material cost per unit 8 6 Direct labor cost per unit 13 16 Overhead applied - Convential costing 6 42 Overhead applied - ABC 45 22.5 Unit product cost 72 86.5

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