10.00 polnts Kunkel Company makes two products and uses a conventional costing s

Question

10.00 polnts 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 $8.00 $ 6.00 $ 10.00 $ 11.00 2.00 7.00 1,000 2.000 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 $640,000. 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 wnich naif of the overhead would continue to be allocated on the basis of direct labor-hours and haif would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year

Explanation / Answer

a) ESTIMATED MANUFACTURING OVERHEAD 640000 b) TOTAL DIRECT LABOR HOURS MECRON 2*1000= 2000 WUCRON 7*2000= 14000 16000 c) TOTAL ENGINEERING DESIGN TIME HRS MECRON 1000 WUCRON 1000 2000 ALLOCATION OF MANUFACTURING OVERHEADS BASED ON CONVENTIONAL SYSTEM COST PER DL HOUR 640000/16000=40 (OVERHEAD COST/DL HOURS) DIRECT LABOR HOURS PER UNIT MECRON 2 WUCRON 7 OVERHEAD RATE = DLH PER UNIT*COST PER DLH MCRON 2*40=80 WUCRON 7*40=280 BASED ON ABC SYSTEM HALF OF OVERHAD COST 320000 COST PER DL HOUR 320000/16000=20 ALOOCATION OF REMAINING COST ON THE BASIS OF DESIGNING TIME MECRON 320000/2000*1000=160000 WUCRON 320000/2000*1000=160000 DIRECT LABOR HOURS PER UNIT MECRON 2 WUCRON 7 OVERHEAD RATE MECRON 160000/1000=160 20*2=40 200 WUCRON 160000/2000=80 20*7=140 220 1 2 PARTICULARS (PER UNIT) MECRON WUCRON MECRON WUCRON DIRECT MATERIAL 8 6 8 6 DIRECT LABOUR 10 11 10 11 OVERHEAD 80 280 200 220 UNIT COST 98 297 218 237

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