Exercise 4-7 (Algo) Contrast ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4] 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 $ 12.00 $4.00 1.20 1,000 Wurcon $9.00 $ 7.00 8.90 2,000 Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced 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 $760,000. 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:
Exercise 4-7 (Algo) Contrast ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4] 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 $ 12.00 $4.00 1.20 1,000 Wurcon $9.00 $ 7.00 8.90 2,000 Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced 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 $760,000. 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:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 4-7 (Algo) Contrast ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4]
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
$12.00
$4.00
Wurcon
$9.00
$ 7.00
8.90
2,000
Direct materials cost per unit
Direct labor cost per unit
Direct labor-hours per unit
1.20
Number of units produced
1,000
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 $760,000. Using the company's conventional costing
system, compute the unit product costs for the two products.
1. Unit product cost under conventional system
2. Unit product cost under ABC system
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
4,000
Wurcon
4,000
Engineering design time (in hours)
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
Total
8,000
Wurcon](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F74c61ca9-effd-433d-8734-376df3377485%2F000f6be7-ba50-434d-ae28-f35b6d61e4f4%2Fqm4n1al_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 4-7 (Algo) Contrast ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4]
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
$12.00
$4.00
Wurcon
$9.00
$ 7.00
8.90
2,000
Direct materials cost per unit
Direct labor cost per unit
Direct labor-hours per unit
1.20
Number of units produced
1,000
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 $760,000. Using the company's conventional costing
system, compute the unit product costs for the two products.
1. Unit product cost under conventional system
2. Unit product cost under ABC system
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
4,000
Wurcon
4,000
Engineering design time (in hours)
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
Total
8,000
Wurcon
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