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) $ 10.00 $ 3.00 0.20 10,000 Wurcon $ 8.00 $ 3.75 0.25 40,000 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 $336,000. 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: Mercon 4,000 Wurcon 4,000 Total 8,000 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.)
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) $ 10.00 $ 3.00 0.20 10,000 Wurcon $ 8.00 $ 3.75 0.25 40,000 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 $336,000. 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: Mercon 4,000 Wurcon 4,000 Total 8,000 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
$ 10.00
Direct materials cost per unit
Direct labor cost per unit
Direct labor-hours per unit
Number of units produced
$ 3.00
0.20
10,000
These products are customized to some degree for specific customers.
Wurcon
$ 8.00
$ 3.75
0.25
40,000
Required:
1. The company's manufacturing overhead costs for the year are expected to be $336,000. 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:
1. Unit product cost under conventional system
2. Unit product cost under ABC system
Mercon
4,000
Mercon
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.)
Total
8,000
Wurcon.
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