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 Mercon $ 12.00 Wurcon $ 9.00 $ 15.00 $ 17.00 0.50 3.25 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. 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: Engineering design time (in hours) Mercon 2,000 Wurcon Total 2,000 4,000 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 1. Unit product cost under conventional system $ 47.90 $ 161.82 2. Unit product cost under ABC system $ 70.00
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 Mercon $ 12.00 Wurcon $ 9.00 $ 15.00 $ 17.00 0.50 3.25 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. 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: Engineering design time (in hours) Mercon 2,000 Wurcon Total 2,000 4,000 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 1. Unit product cost under conventional system $ 47.90 $ 161.82 2. Unit product cost under ABC system $ 70.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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
Mercon
$ 12.00
Wurcon
$ 9.00
$ 15.00
0.50
$ 17.00
3.25
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.
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:
Engineering design time (in hours)
Mercon
2,000
Wurcon
Total
2,000
4,000
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
1. Unit product cost under conventional system
$
2. Unit product cost under ABC system
$
47.90 $
70.00
161.82
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