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: Mercon Wurcon Direct materials cost per unit $ 12.00 $ 9.00 Direct labor cost per unit $ 15.00 $ 17.00 Direct labor-hours per unit 0.50 3.25 Number of units produced 2,000 4,000 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

Explanation / Answer

Kunkel Company Details Mercon Wurcon Total Direct Materials per unit                   12.00                  9.00 Direct Labor cost per unit                   15.00               17.00 Direct labor hours per unit                      0.50                  3.25 Units produced             2,000.00         4,000.00 Total Direct Labor hours             1,000.00       13,000.00       14,000 Direct Labor hour ratio=                      0.07                  0.93 . Total Manufacturing OH         560,000.00 Manufacturing OH cost /Direct Labor Hour                   40.00 Unit Product cost in Conventional System Details Mercon Wurcon Direct Materials per unit                   12.00                  9.00 Direct Labor cost per unit                   15.00               17.00 Direct labor hours per unit                      0.50                  3.25 Manufacturing OH @40 per Hr=                   20.00             130.00 Total Unit Cost of Production= $               47.00 $         156.00 Under ABC system: OH to be allocated by traditional system:           280,000 Total Direct labor hrs                 14,000 Overhead/Direct Labor Hr=                         20 Overhead to be allocated by ABC=               280,000 Activity details Mercon Wurcon Total Engineering design Hours                   2,000               2,000         4,000 Allocated Ovehead =               140,000           140,000     280,000 No of Units produced                     2,000               4,000 Overhead /unit by ABC=                         70                     35 Unit Cost Using ABC Details Mercon Wurcon Direct Materials per unit                   12.00                  9.00 Direct Labor cost per unit                   15.00               17.00 Direct labor hours per unit                      0.50                  3.25 Manufacturing OH @20 per Hr=                   10.00               65.00 Mnaufacturing OH as Per ABC                   70.00               35.00 Total Unit Cost of Production= $             107.00 $         126.00

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